Inflation is crucial for the Japanese central bank’s monetary policy.
(Photo: Reuters)
Dusseldorf For the 15th time in a row, the inflation rate in Japan is above the central bank’s target. Consumer prices excluding fresh food rose by 3.3 percent in June compared to the same month last year, as the statistics office announced on Friday. Economists had expected this value in advance. In May, the rate was still 3.2 percent.
The inflation rate, which also excludes energy prices that are susceptible to fluctuations, even rose by 4.2 percent (previous month: 4.3 percent). This figure is close to how core inflation is calculated in other countries.
Core inflation is an important and therefore much-noticed indicator of medium-term price developments. The rate has fallen in Japan for the first time since January 2022. That could be a sign that the rapid rise of recent months, triggered by a series of corporate price hikes, is leveling off.
So the new price data gives mixed signals for the upcoming Bank of Japan (BoJ) meeting in the new week. On July 27th and 28th, the monetary watchdogs will decide whether to maintain their ultra-loose monetary policy.
A realignment would be surprising given the current status. Economist Taro Kimura told Bloomberg news agency that the new data would encourage the central bank to continue pursuing current policies. Central bank chief Kazuo Ueda recently signaled this. Kimura said the BoJ will most likely conclude “stimulus remains necessary as demand is still insufficient to push prices higher.”
A report by the Reuters news agency, citing insiders, fits in with this, according to which the controversial yield curve control will be retained. The currency watchdogs would first want to evaluate further data, for example with regard to the development of corporate profits and wages.
The key interest rate in Japan is minus 0.1 percent. With the instrument of yield curve control, the BoJ keeps the interest rates for ten-year government bonds (JGBs) in a corridor of plus/minus 0.5 percent around zero. This approach is controversial, especially in the context of the recent increase in price pressure.
The Japanese yen continued its weak weekly performance after the release of the new data. The currency fell more than 1 percent against the US dollar to 142 yen.
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