© Reuters.
Investing.com – Data on Friday showed Japanese consumer inflation rose slightly less-than-expected in June, amid lower energy costs, although core inflation and the Bank of Japan’s main index remained flat.
It grew 3.3% in June, below expectations for 3.5% growth, but slightly higher than the previous month’s reading of 3.2% – data from the statistics bureau showed.
— which leaves out volatile fresh food costs — grew 3.3% in the month as expected, up slightly from 3.2% last month.
But the other core reading, which excludes both fresh food and energy prices, grew 4.2% in June, staying close to the 40-year highs hit the previous month. The reading is an indicator of underlying inflation conditions in Japan, and is closely watched by the Bank of Japan (BOJ) in consideration of monetary policy.
However, easing general inflation puts less pressure on the Bank of Japan to immediately start tightening monetary policy and change the yield curve control (YCC) mechanism. The bank has given scant signs that it intends to start changing its YCC in the near term, but has hinted at a definitive change later in the year or early 2024, as wage growth stabilizes.
While overall CPI inflation now appears to have stabilized just around 3%, it remained well above the Bank of Japan’s annual target of 2%, which is expected to eventually attract tightening action by the central bank.
Bank of Japan Governor Kazuo Ueda recently indicated that it will take some time for inflation to reach the 2% target.
The electricity subsidy introduced by the Japanese government earlier this year was the main contributor to easing inflation in the country, as well as stabilizing energy import prices.
But food inflation remains high, with prices rising steadily over the months.
Japan’s dependence on imports was the main reason why inflation soared to a 40-year high earlier in the year. Weakness in the US, amid the widening gap between domestic and US interest rates, is also a factor in Japanese inflation.
The yen rose 0.2% after reading on Friday.
