Japan's core inflation slows in July, stays above BoJ target

Japan's core inflation slowed for a second straight month in July but stayed above the central bank's 2 per cent target, keeping alive market expectations for another interest rate hike in the coming months.

- 

The nationwide core consumer price index (CPI), which excludes fresh food items, rose 3.1 in July from a year earlier, government data showed on Friday, faster than a median market forecast for a 3.0% gain.

The rise was smaller than the 3.3% increase in June, due largely to the base effect of last year’s increase in energy prices, which came from the termination of government subsidies to curb fuel bills.

"Inflation is clearly slowing from May, when it hit 3.7, and is expected to continue easing for the rest of the year due to a moderation in rice price surges and the resumption of energy subsidies," said Kazutaka Maeda, economist at Meiji Yasuda Research Institute.

"Still, inflation remains elevated. The price situation continues to support the case for the BOJ (Bank of Japan) to raise interest rates," he said, adding that a rate hike could come as early as October.

Energy prices fell 0.3%, the first year-on-year drop since March last year. But food inflation, excluding volatile fresh products, accelerated to 8.3% in July from 8.2% in June, suggesting that rising living costs continued to pressure households.