Inflation in Tokyo stays above BOJ’s target for 13th straight month

CORE consumer prices in Japan’s capital rose 3.2 per cent in June from a year earlier, exceeding the central bank’s 2 per cent target for the 13th straight month in a sign of broadening inflationary pressure, government data showed on Friday (Jun 30).

Separate data showed factory output fell more than expected in May, underscoring risks to the export-reliant economy as aggressive US interest rate hikes and soft Chinese growth cloud the outlook for global demand.

The inflation figures for Tokyo, which is seen as a leading indicator of nationwide trends, will likely keep alive expectations the Bank of Japan (BOJ) will phase out its massive stimulus this year.

The increase in the Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, followed a 3.1 per cent gain in May and compared with a median market forecast for a 3.3 per cent rise.

An index that strips away both fresh food and fuel costs rose 3.8 per cent in June from a year earlier after a 3.9 per cent gain in May, the data showed.

Japan’s economy is finally recovering from the scars of the Covid-19 pandemic, though risks of a global slowdown and rising food prices hang over the outlook for exports and consumption.

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With inflation already exceeding its target, markets are rife with speculation the BOJ could soon phase out ultra-loose monetary policy under new governor Kazuo Ueda.

Ueda has repeatedly said inflation will slow in coming months as cost-push factors dissipate, and that the BOJ will maintain ultra-loose policy until stronger wage growth ensures Japan can sustainably see inflation hit its 2 per cent target.

But he told a seminar on Wednesday the BOJ would see good reason to shift monetary policy if it became “reasonably sure” that inflation would accelerate into 2024 after a period of moderation. REUTERS