Core consumer prices in the Japanese capital rose 2.1% in June from a year earlier, data showed Friday. Inflation accelerated from the previous month as rising fuel bills and higher import costs due to the weak yen weighed on households.
The data highlights the challenge the Bank of Japan (BOJ) faces in timing its next interest rate hike, as cost pressures from the weak yen keep inflation above its target by 2%, but also harm consumption.
The increase in Tokyo’s core consumer price index (CPI), a leading indicator of national figures, was higher than the median market forecast of a 2.0% gain and followed a increase of 1.9% in May.
A separate index that excludes the effects of fresh food and fuel costs, closely watched by the BOJ as a broader indicator of price trends, rose 1.8% in June after a 1.7% rise. % in May.
Japan’s economy contracted 1.8% at an annual rate in the first quarter as businesses and households cut spending, casting doubt on the central bank’s prospects for a moderate recovery.
While analysts expect growth to pick up in the current quarter, the weak yen is weighing on household morale by increasing the cost of fuel and food imports.
In March, the BOJ ended eight years of negative interest rates and other vestiges of its radical monetary stimulus, saying that a sustained achievement of its 2% inflation target was no longer in sight.
BOJ Governor Kazuo Ueda said the central bank would raise interest rates, currently near zero, if underlying inflation, which takes into account the CPI and other price indicators, rises higher. wide, accelerated to reach 2%, as it currently forecasts.
The central bank expects rising wages to boost services inflation and keep inflation sustainably around 2%, a condition it has set as a prerequisite for continuing to taper monetary stimulus.
