Japan's core inflation picks up, but demand-driven growth below 2%
Japan: Japan's core inflation increased for the third consecutive month in July, with the nationwide core consumer price index (CPI) rising 2.7% year-on-year, up from 2.6% in June. This marked the 28th straight month of inflation at or above the Bank of Japan's (BOJ) 2% target. However, the "core " index, which excludes fresh food and energy costs and is closely watched by the BOJ, slowed to 1.9%, dipping below 2% for the first time since September 2022. Experts noted that the core CPI increase was influenced by the phase-out of government subsidies for household utility bills, with underlying inflation slowing.
This data is crucial as the BOJ considers further interest rate hikes, following its July decision to raise rates to a 15-year high. BOJ Governor Kazuo Ueda reaffirmed the central bank's readiness to hike rates again if inflation remains on track to sustainably hit the 2% target but acknowledged the need to be vigilant given the instability in financial markets. Despite strong economic growth in the second quarter, 57% of economists in a recent Reuters poll predicted the BOJ would raise borrowing costs again by the end of the year.
Source: Reuters