Japan core consumer prices up 2.2 percent in June    

TOKYO

Japan’s core consumer prices for items excluding fresh products rose 2.2 percent in June from a year earlier, driven by energy costs, government data showed on July 22.

Excluding energy, the increase was just one percent compared to a year earlier, according to data released by the Interior Affairs Ministry.

The June inflation figures were in line with expectations and mark the third consecutive month that the reading has come in over two percent, after 2.1 percent increases in April and May.

Japan’s central bank has a longstanding goal of reaching two percent inflation, but it regards the current price increases as temporary and linked to soaring energy costs driven by the war in Ukraine.

As a result, it has maintained its monetary easing policies at a time when central banks elsewhere are hiking rates to tackle inflation.

On July 21, the bank raised its inflation forecasts, projecting 2.3 percent for the fiscal year 2022/23, up from a previous expectation of 1.9 percent.

The Bank of Japan this week decided to it hold rates at minus 0.1 percent and continue buying unlimited government bonds to maintain a low cap on long-term yields.

The central bank views current price increases, driven by pandemic supply snarls and higher commodity prices linked to the war in Ukraine, as temporary.

Meanwhile, a preliminary reading on factory activity for Japan showed on July 22 that output and new orders contracting to their worst levels in months.

Companies blamed shortages of raw materials and rising costs, but demand may be weakening as the country endures yet another wave of coronavirus outbreaks, economists said.

July’s purchasing manager indexes “suggest that the manufacturing sector is slowing as demand weakens, while the latest COVID-19 is starting to hit the service sector,” Marcel Thieliant of Capital Economics said in a commentary.