By Leika Kihara
TOKYO (Reuters) - Japanese households' sentiment worsened in the three months to December and their expectations of inflation hit a four-year low, a central bank survey showed, underscoring the challenges of eradicating the country's sticky deflationary mindset.
The bleak reading suggests households remain doubtful that the Bank of Japan's aggressive monetary stimulus will heighten inflation to its 2 percent target, keeping the bank under pressure to do more to spur growth.
The BOJ's quarterly survey on people's livelihood showed the ratio of households who expect prices to rise a year from now stood at 64.7 percent in December, down from 65.1 percent in September and the lowest level since December 2012.
The ratio fell for six straight quarters, despite more than three years of massive monetary stimulus by the BOJ aimed at boosting public expectations of future price growth.
Of the total number of households, 77.6 percent expect inflation to pick up five years from now, down from 80.1 percent in September, the survey showed on Friday.
A separate index measuring households' confidence about the economy stood at minus 24.8 in December, worsening from minus 23.1 in September.
The index subtracts the ratio of households who feel economic conditions have worsened from those who believe they have improved. A negative reading means more households feel economic conditions have deteriorated.
The gloomy outcome underscores the dilemma the BOJ faces as it battles mounting external headwinds and a dwindling policy tool-kit.
Underscoring public doubts over the BOJ's policies, less than a quarter of households surveyed said they knew about the central bank's new policy framework that aims to control bond yields and keep borrowing costs low.
The survey was conducted on 4,000 households between Nov. 10 and Dec. 6.
The BOJ deployed a massive asset-buying program in April 2013 to meet its pledge to beat deflation and accelerate inflation to its ambitious 2 percent target.
After having failed to hit its price target despite more than three years of heavy money printing, the BOJ revamped its policy framework in September to one targeting interest rates.
(Reporting by Leika Kihara; Editing by Shri Navaratnam)