Japan June core inflation accelerates, stays below BOJ target

Japan's core consumer prices increased by 1.6% in June compared to the previous year, a figure that met market expectations but remained below the Bank of Japan's 2% inflation target for the fifth consecutive month. This persistent gap is attributed to fuel subsidies counteracting the impact of rising raw material costs, exacerbated by the conflict in the Middle East.

The core consumer price index, which excludes fresh food, showed a 1.4% rise in May. Meanwhile, an index that further strips out both fresh food and fuel prices, closely monitored by the central bank as a more accurate indicator of underlying inflation, saw a 1.7% increase in June, down from 1.8% in May.

These inflation figures will be a key consideration for the Bank of Japan at its upcoming policy meeting. The bank is widely anticipated to maintain its current interest rates and release updated quarterly economic projections. In June, the BOJ implemented a significant policy shift by raising interest rates to a 31-year high, signaling a potential for further tightening as it aims to curb inflationary pressures stemming from energy price shocks linked to the conflict involving Iran.