Japan’s core consumer inflation in June edged higher, yet continued to fall short of the Bank of Japan’s (BOJ) 2% target for the fifth consecutive month, newly released government data showed. The increase points to companies holding back on passing rising input costs onto consumers, despite notable pressures on producer prices.
The core consumer price index, which removes volatile fresh food prices, increased 1.6% year-on-year, up from 1.4% in May and matching analyst forecasts. Headline inflation reached 1.7%, while an alternative measure that excludes both fresh food and energy also registered at 1.7%, the lowest in nearly four years.
While the rise in core inflation reflects part of the base effect from last year’s government fuel subsidies, food costs eased, notably due to a decline in rice prices. The producer price index jumped 7.1% in June, the fastest pace since March 2023. Businesses are absorbing much of the impact from higher energy and material costs.
According to analysts, persistent yen weakness and elevated oil prices could push inflation higher and accelerate the timing of BOJ policy adjustments. Some market participants anticipate that if these trends continue, the BOJ might implement another rate hike sooner than previously anticipated.
The BOJ is expected to keep its policy stance unchanged at its upcoming meeting, with new quarterly economic projections being closely watched. The central bank is monitoring upstream price dynamics and currency developments.
