Japan’s inflation remains above central bank’s 2% target

Japan’s core consumer inflation stayed over the central bank’s 2% target in June for a third consecutive month as the economy was hampered by high global raw material costs that increased the price of imports in the nation.

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Even while households are concerned about rising expenses, the rise in consumer prices calls into question the Bank of Japan’s view that recent price increases in the third-largest economy in the world will only be temporary.

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According to official statistics, the nationwide core consumer price index (CPI), which includes energy costs but excludes volatile fresh food prices, increased 2.2% from a year earlier in June.

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The statistics, which matched the overall market expectation, showed that inflation remained over the BOJ’s 2% objective for the third month in a row. It follows 2.1% increases in May and April.

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The core CPI, which excludes volatile food and fuel costs, increased 1.0% year on year in June, the largest increase since February 2016.

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However, the total rate of price increases in Japan remains far lower than in the United States and Europe, since sluggish wage growth and a gradual rebound in consumption deter Japanese businesses from raising prices.

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Inflation in the 19 eurozone countries has reached all-time highs of more than 8%. Last month, British inflation reached its highest level in 40 years.

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The Bank of Japan boosted its core consumer inflation projection for the current fiscal year, which ends in March 2023, to 2.3% from 1.9% on Thursday, but maintained its ultra-low interest rates even as several of its global rivals tightened policy in an attempt to calm inflationary pressures.

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Analysts predict that rising fuel and food prices, caused in part by Russia’s invasion of Ukraine and a steeply weakening yen, would keep Japan’s core consumer inflation over the BOJ’s target for most of the year.