Core inflation in Tokyo slows but stays above BOJ target

[TOKYO] Core consumer inflation in Tokyo slowed in June but stayed well above the Bank of Japan’s (BOJ) 2 per cent target, data showed on Friday (Jun 27), keeping alive market expectations for further interest rate hikes.

The Tokyo consumer price index (CPI), which excludes volatile fresh food costs, rose 3.1 per cent in June from a year earlier, government data showed, compared with a median market forecast for a 3.3 per cent gain. It slowed from a 3.6 per cent increase in May.

A separate index for Tokyo that strips away both fresh food and fuel costs – closely watched by the central bank as a measure of domestic demand-driven prices – rose 3.1 per cent in June from a year earlier after a 3.3 per cent gain in May, the data showed.

The BOJ exited a decade-long, radical stimulus programme last year and raised short-term interest rates to 0.5 per cent in January on the view Japan was on the cusp of sustainably hitting its 2 per cent inflation target.

Central bank governor Kazuo Ueda has said the BOJ will keep pushing up borrowing costs if continued wage gains underpin consumption and allow firms to raise prices, thereby maintaining inflation stably around its 2 per cent target.

The rising cost of living has drawn the attention of some BOJ board members including Naoki Tamura, who said on Wednesday that the BOJ may need to raise interest rates “decisively” if upward inflation risks heighten. REUTERS