Japan’s inflation re-accelerates in June, stays above BOJ target

TOKYO :Japan’s core consumer inflation re-accelerated in June and stayed above the central bank’s 2 per cent target for the 15th straight month, data showed on Friday, adding to recent signs of broadening price pressures.

The data heightens the chance the Bank of Japan (BOJ) will revise up this year’s inflation forecast in fresh projections due next week, when the board debates whether conditions are falling into place to begin phasing out its massive stimulus.

The nationwide core consumer price index (CPI), which excludes fresh food costs, rose 3.3 per cent in June from a year earlier, matching a median market forecast. It followed a 3.2 per cent gain in May.

A hike in utility bills added to a steady increase in food and daily necessity prices, adding to the burden of households.

Services prices, closely watched by policymakers on whether inflation is becoming driven more by higher labour costs, rose 1.6 per cent in June from a year earlier after a 1.7 per cent gain in May.

But so-called “core core” inflation, which strips away both fresh food and fuel costs, slowed 4.2 per cent in June from a 4.3 per cent rise in May, a sign the rapid pace of increase seen in the past few months was moderating.

As inflation perks up, markets are simmering with speculation the BOJ could soon phase out its controversial yield curve control (YCC) policy that is criticised for distorting market pricing and narrowing margins for financial institution.

BOJ Governor Kazuo Ueda’s remarks on Tuesday that Japan was still distant from sustainably achieving the bank’s 2 per cent target have pushed down the yen and boosted Japanese shares, as investors scaled back bets of a near-term tweak to YCC.

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

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