Core inflation in Tokyo, Japan, accelerated in June due to rising fuel bills and the weak yen, maintaining expectations for a near-term interest rate hike by the Bank of Japan (BOJ). Data released on Friday indicated that the core consumer price index (CPI) in Tokyo rose by 2.1% year-over-year, exceeding market forecasts of a 2.0% gain.
The increase in core inflation, alongside a 1.8% rise in a separate index excluding fresh food and fuel costs, suggests sustained price pressures. Analysts believe these trends could prompt the BOJ to raise interest rates as early as this month.
Additionally, factory output in Japan rebounded in May, driven by a sharp recovery in auto production. This positive economic signal supports the potential for a moderate recovery, despite the first-quarter contraction due to reduced spending by companies and households.
Marcel Thieliant from Capital Economics noted that rising industrial product prices in the CPI align with BOJ concerns about rapid pass-through of import costs. This supports the view that the BOJ might lift its policy rate at its July meeting.
Service inflation in Tokyo also increased, indicating that companies are passing on rising labor costs through price hikes. Overall, Japan’s economy faces mixed signals, with a weak yen affecting household sentiment by raising import costs.
The BOJ, which ended its negative interest rate policy in March, is monitoring underlying inflation trends and wage growth. BOJ Governor Kazuo Ueda has stated that further rate hikes will depend on sustained inflation around the 2% target, driven by rising wages and service prices.
Tags: #Japan #Inflation #BankOfJapan #InterestRates #EconomicRecovery
