Japan’s core inflation stayed above the central bank’s 2-percent target in June for the 15th straight month but an index stripping away the effect of energy costs slowed, data showed. | Reuters
“While services prices may rise next year, those for goods will stay weak. Inflation could hover around 1 percent next year.”
But an index stripping away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of trend inflation, rose 4.2 percent in June from a year earlier, slower than a 4.3-percent gain in May. Services prices, closely watched by policymakers on whether inflation is becoming driven more by higher labor costs, rose 1.6 percent in June from a year earlier after a 1.7-percent gain in May.The data comes ahead of the BOJ’s closely-watched policy meeting on July 27-28, when the board will release fresh quarterly projections and discuss how much progress Japan is making towards sustainably achieving its 2 percent inflation target.
BOJ Governor Kazuo Ueda has stressed the need to keep policy ultra-loose until the recent cost-push inflation shifts into one driven by robust domestic demand and higher wage growth.The key would be whether companies will continue offering higher pay next year, similar to this year, and start translating the rise in labor costs to services prices.
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