Core inflation in Japan's capital stays above BoJ target in July

Core consumer inflation in Japan’s capital slowed in July but stayed well above the central bank's 2 per cent target in July, data showed on Friday, adding to renewed market expectations for another interest rate hike this year.

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The data will be among factors the Bank of Japan will scrutinise at its next rate review on July 30-31, when the board is expected to revise up this fiscal year’s inflation forecast in a quarterly review of its projections.

The Tokyo consumer price index (CPI), which excludes volatile fresh food costs, rose 2.9 per cnet in July from a year earlier, government data showed, slightly below a median market forecast for a 3.0 per cent increase. It followed a 3.1% rise in June.

The slowdown was due largely to the base effect of last year’s rise in energy prices, which came from the termination of government subsidies to curb fuel bills.

Food inflation, excluding the cost of volatile fresh products, accelerated to 7.4 per cent in July from 7.2 per cent in June in a sign households continued to face rising living costs.

A separate index for Tokyo that strips away both fresh food and fuel costs-closely watched by the BOJ as a measure of domestic demand-driven prices-rose 3.1 per cent in July from a year earlier, matching the pace in June, the data showed.

Service prices rose 2.1 per cent in July from a year earlier, steady from June, the data showed, suggesting that companies continued to pass on rising labour costs from higher wages.