MNI BRIEF: Japan July Tokyo Core CPI Rises 2.9% Vs. June 3.1%

The Tokyo core inflation rate decelerated to 2.9% y/y in July, from June’s 3.1%, but stayed above 2% for the ninth straight month, data from the Ministry of Internal Affairs and Communications showed on Friday.

The July index was weighed down by crude oil prices (-0.8% vs. +3.6%), despite higher food prices excluding perishables (+7.4% vs. +7.2%).

The core-core CPI, a key indicator of underlying inflation that excludes fresh food and energy, rose 3.1% y/y in July, unchanged m/m and marking five straight months above 2%.

Tokyo saw processed food prices, items the BOJ closely follows, rise 5.6% in July, accelerating from June’s 5.2%, with services prices up 2.1%, unchanged m/m.

Bank of Japan officials assessed the recent movements in consumer prices as stronger than expected, attributing the upside surprise in part to elevated rice prices.

While they anticipate that the recent decline in rice prices will gradually pass through to food and related categories, uncertainty remains regarding the pace of overall CPI deceleration.

The Bank’s policy board is expected to revise its median forecast for core CPI upward from the 2.2% projection made in April.