In June, Japanese consumer inflation increased less than anticipated due to lower energy prices, according to statistics released on Friday, while core inflation and a key Bank of Japan indicator remained static. According to data from the Statistics Bureau, the national consumer price index inflation rate increased by 3.3% in June, which was slightly higher …
In June, Japanese consumer inflation increased less than anticipated due to lower energy prices, according to statistics released on Friday, while core inflation and a key Bank of Japan indicator remained static. According to data from the Statistics Bureau, the national consumer price index inflation rate increased by 3.3% in June, which was slightly higher than the previous month’s figure of 3.2% but less than the 3.5% growth that was anticipated. Core CPI, which excludes the variable expenses of fresh food, increased by 3.3% in the month as predicted, advancing slightly from the 3.2% recorded in the previous month.
However, a different core reading, which does not include fresh food or energy prices, increased 4.2% in June and remained quite close to the 40-year highs reached in the prior month. The Bank of Japan (BOJ) regularly monitors the reading as a proxy for underlying inflation circumstances in Japan and takes it into account when determining its monetary policy. Even said, declining headline inflation reduces the impetus on the BOJ to start tightening monetary policy and changing its yield curve control (YCC) mechanism right now. The bank hasn’t made many indications that it plans to start changing its YCC soon, although it has hinted that it might once wage growth stabilizes later this year or in the early months of 2024. While overall CPI inflation now appeared to have steadied around slightly above 3%, it still remained well above the BOJ’s 2% annual target, which is expected to eventually attract tightening measures by the central bank. In recent remarks, BOJ Governor Kazuo Ueda said that it would take some time for inflation to reach the 2% target.
The Japanese government’s introduction of electricity subsidies earlier this year, along with the stability of import energy costs, were the key factors in reducing inflation in the nation. However, there was still significant food price inflation present, as prices continued to rise over the course of the months. The main factor driving Japan’s inflation spike to 40-year highs earlier in the year was the country’s reliance on imports. Japanese inflation was also influenced by yen weakness and a widening spread between domestic and US interest rates. Following the reading on Friday, the yen increased by 0.2%.
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