In May, core consumer prices fell 1.1 percent from a year earlier - the sharpest decline since comparable records began in 1970.
According to Hiroshi Watanabe, an economist at the Daiwa Institute of Reseach told AFP the decline was a result of lower oil costs.
Japan suffered a deflationary spiral in the 1990s which eroded corporate earnings and encouraged consumers to delay spending in the belief that prices would fall further.
The consumer data is part of a decidedly mixed picture for Japan.
Japan's level of joblessness has hit a five-year high. The jobless rate rose to 5.2 percent from 5 percent in April, with the ratio of positions available to each applicant dropping to 0.44, the lowest since the survey began in 1963, according to the Labour Ministry.
At the same time, the pace of contraction in the manufacturing sector is beginning to slow.
The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 48.2 in June, the highest since 48.6 in April 2008, from 46.6 in May.
However, the figure remained below the 50 threshold that separates contraction from expansion for the 16th straight month.
Source: AFP, Forbes, Bloomberg
