Inflation in Japan Remains Above BOJ Target for Third Month in a Row

Japanese consumer core inflation was above the central bank’s target of 2% for the third month in a row in June. The economy is under pressure from high commodity prices on the world market, and the country’s import costs are rising.

The rise in consumer prices contradicts the Bank of Japan’s view that the recent rise in prices in the world’s third-largest economy will be temporary.

The nationwide Consumer Price Index (CPI), which excludes the fluctuating cost of staple foods but includes energy costs, rose 2.2% in June from a year earlier.

Core CPI, which excludes volatile food and fuel costs, rose 1.0% year-on-year in June. This is the fastest increase since February 2016.

Analysts said higher oil and food prices were partly due to the Russian invasion of Ukraine and the sharp weakening of the yen, which depressed import costs. Core inflation for Japanese consumers is expected to be above the BOJ’s target for most of this year.

However, this means that the overall price increase in Japan is still below the strong increase in the USA and the EU economy. Due to sluggish wage growth and the slow recovery in consumption, Japanese companies are not in a position to raise prices.

Inflation in 19 countries that share the euro reached a record high of over 8%. In the United Kingdom, inflation reached a 40-year high last month.

The BOJ yesterday raised its forecast for core consumer inflation in the current fiscal year to 2.3% from 1.9%, but kept interest rates at ultra-low levels even as a number of companies around the world tightened policies to ease price pressures.

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