Core inflation in Tokyo accelerated in June as rising energy costs continued to filter through the economy, reinforcing expectations that the Bank of Japan (BOJ) could continue raising interest rates despite easing global inflation concerns.
Official data showed Tokyo’s core consumer price index (CPI), which excludes fresh food prices, rose 1.6% year-on-year in June, up from 1.3% in May and in line with market expectations. However, inflation remained below the BOJ’s 2% target for a fifth consecutive month.
A separate inflation gauge that strips out both fresh food and fuel, closely monitored by the BOJ as a measure of underlying price trends, climbed 1.9% in June from 1.6% in May, suggesting inflationary pressures are spreading beyond energy into other sectors such as food.
Kanako Nakamura, economist at Daiwa Institute of Research, said the rise in crude oil prices since around February had gradually pushed up electricity and gas costs, with broader price pressures now emerging beyond energy.
The figures come ahead of the BOJ’s policy meeting next month, when policymakers will review their growth and inflation forecasts.
While wholesale inflation surged to a three-year high of 6.3% in May as businesses passed on higher energy costs, some economists believe inflation may not accelerate as much as the central bank expects.
Takeshi Minami, chief economist at Norinchukin Research Institute, said he doubted energy-related price pressures would lift core inflation to the 3% level projected by the BOJ, particularly as inflationary concerns have eased in the US and Europe.
The BOJ raised interest rates to a 31-year high earlier this month as part of its policy normalisation, signalling its willingness to tighten further as it monitors the inflationary impact of higher energy prices linked to the conflict involving Iran.
