MNI BRIEF: Japan June Tokyo Core CPI Rises 3.1% Vs. May 3.6%

Tokyo’s core inflation slowed to 3.1% y/y in June from 3.6% in May, but remained above the Bank of Japan’s 2% target for the eighth consecutive month, data from the Ministry of Internal Affairs and Communications showed Friday.

The deceleration was mainly driven by a smaller rise in crude oil prices (+3.6% vs. +8.7% in May), though this was partially offset by higher prices for non-perishable food (+7.2% vs. +6.9%) and household durable goods (+3.3% vs. +2.7%).

The core-core CPI, which excludes both fresh food and energy and is a key indicator of underlying inflation, also eased to 3.1% y/y in June from 3.3% in May, but stayed above 2% for the fourth straight month.

Processed food prices, a category closely watched by BOJ officials due to its sensitivity to economic conditions, rose 5.2% y/y in June, accelerating from May’s 4.7%, while services prices rose 2.1%, slightly down from 2.2% in May.

The data reinforces the BOJ’s view that inflation is on a stable path, supporting the case for a future rate hike. 

However, downside risks to the economy stemming from U.S. trade policies, highlighted in the Bank’s recent Outlook Report, are likely to delay any immediate policy tightening. (See MNI BOJ WATCH: Ueda Flags Gradual Hikes, Warns Of JGB Risks)