Japan CPI rises as expected in June, core inflation below BOJ target

Japanese consumer price index inflation grew as expected in June, while core inflation advanced but still remained below the Bank of Japan’s annual target.

Core CPI inflation– which excludes volatile fresh food prices– rose 1.6% year-on-year, government data showed on Friday. The print was in line with expectations and remained below the BOJ’s 2% annual target.

A core reading that excludes both fresh food and energy prices fell to 1.7% in June from 1.8% in the prior month. The print is closely watched by the BOJ as a gauge of underlying inflation.

Headline CPI rose to 1.7% y-o-y from 1.5% in the prior month, the highest CPI reading for the year.

Inflation picked up but remained relatively subdued as government subsidies on fuel and utility largely shielded the public from high commodity prices stemming from the Middle East war.

Friday’s reading comes just days before a BOJ meeting, where the central bank is widely expected to leave interest rates unchanged amid languid headline inflation.

The BOJ hiked interest rates to a 31-year high in June as it forecast rising inflation risks from the Iran conflict. Japanese consumer spending was also seen picking up in recent months, even as the headline inflation figure remained unchanged.