Japan core inflation eases to 3.1% but price pressure remains

People shop at a market in Tokyo, Japan March 3, 2023. REUTERS/Androniki Christodoulou/File photo

TOKYO  – Japan’s core consumer inflation slowed in July but stayed above the Bank of Japan’s (BOJ) price target for the 16th straight month, with cost-push inflation likely to keep the central bank from rushing to phase out monetary easing anytime soon.

The 3.1-percent rise in the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, matched a median market forecast, following a 3.3-percent increase in the previous month.

The so-called core-core inflation index, which excludes fresh food and energy prices and is closely watched by the BOJ as a better gauge of trend inflation, rose 4.3 percent year-on-year in July, accelerating from the previous month.

The central bank argues that wage pressures have yet to build up enough to warrant a fresh tweak to the ultra-loose monetary stance.

Food prices were among the major contributors to the overall inflation due to elevated prices of raw materials.

The data comes after the BOJ’s closely watched policy meeting on July 27-28 in which the central bank tweaked monetary policy to allow the 10-year bond yield cap to move more flexibly.

BOJ Governor Kazuo Ueda has stressed the need to keep policy ultra-loose until cost-push inflation shifts into one driven by robust domestic demand and higher wage growth.

Under the BOJ’s yield curve control, the bank guides short-term interest rates at -0.1 percent and buys huge amounts of government bonds to cap the 10-year bond yield around 0 percent as part of efforts to fire up inflation to its 2 percent target.