Core inflation in Tokyo - seen as an early indicator of the national number - slowed to 2.4% on the year in March.
A broader index that excludes volatile food and fuel prices also fell.
But if that will please consumers, who have been hit by a soaring cost of living, it's a new conundrum for the Bank of Japan.
The central bank has only recently started to move away from negative rates.
It has wanted to see signs of sustained inflation in order to make further rate increases.
But economists say the new figures add to evidence that domestic demand remains weak, leaving the bank's next move in doubt again.
Japanese Prime Minister Fumio Kishida may not mind. ?
On Thursday he said he was happy to see the Bank of Japan keep monetary policy loose.
Kishida says the country still hasn't won its long battle against deflation, meaning there's no rush to raise rates.
Other data Friday added to signs of fragility in the economy.
Japanese factory output unexpectedly fell 0.1% in February from the previous month.
Economists had forecast a solid increase.
