TOKYO: Japan’s core consumer inflation remained above the central bank’s 2% target for a third straight month in June, as the economy faced pressure from high global raw material prices that have pushed up the cost of the country’s imports.
The rise in consumer prices challenges the Bank of Japan’s (BOJ) view that recent price increases in the world’s third-largest economy will remain somewhat temporary, even as households worry about higher living costs.
The nationwide core consumer price index (CPI), which excludes volatile fresh food costs but includes those of energy, rose 2.2% in June from a year earlier, government data showed.
The data, which matched a median market forecast, meant inflation stayed above the BOJ’s 2% target for a third consecutive month. It followed rises of 2.1% in May and April.
The core-core CPI, which strips away both volatile food and fuel costs, was up 1.0% in June from a year earlier, marking the sharpest rise since February 2016.
Rising fuel and food prices, blamed partly on Russia’s invasion of Ukraine and a sharply weakening yen that is swelling import costs, are expected to keep Japan's core consumer inflation above the BOJ’s target for most of this year, analysts say.
But that still leaves the overall pace of price increases in Japan well below much sharper rises in the United States and European economies, as sluggish wage growth and a slow recovery of consumption discourages Japanese firms from price hikes.
The BOJ yesterday raised its core consumer inflation forecast for the current fiscal year ending in March 2023 to 2.3% from 1.9%, but kept its ultra-low interest rates in place even as many of its global peers sharply tighten policy in an attempt to cool price pressures.
BOJ governor Haruhiko Kuroda brushed aside the chance of near-term policy tightening, saying he had “absolutely no plan” to raise interest rates or increase an implicit 0.25% cap set for the bank’s 10-year bond yield target.
“The economy is in the midst of recovering from the pandemic. Japan’s worsening terms of trade are also leading to an outflow of income,“ Kuroda told a news conference.
“As such, we must continue with our easy policy to ensure rising corporate profits lead to moderate wage and price growth,“ he said.
As widely expected, the BOJ maintained its -0.1% target for short-term rates and that of 10-year bond yields around 0%. – Reuters