Japan’s core inflation hits 15-month high on energy costs By Reuters

© Reuters. FILE PHOTO: Shoppers wearing protective face masks, following an outbreak of the coronavirus disease (COVID-19), are seen at a supermarket in Tokyo, Japan March 27, 2020. REUTERS/Issei Kato/File Photo

By Leika Kihara

TOKYO (Reuters) – Japan’s core consumer prices rose 0.2% in June from a year earlier to mark the fastest annual pace in over a year, data showed on Tuesday, a sign the impact of global commodity inflation was gradually broadening.

But the increase, driven largely by higher energy costs, was much smaller than that of other major economies due to weak consumption, reinforcing expectations the Bank of Japan will be forced to maintain its massive stimulus for the time being.

The rise in the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, matched a median market forecast for a 0.2% gain and followed a 0.1% increase in May. It was the fastest annual pace since a 0.4% gain marked in March 2020.

Some countries, including the United States and Britain, have seen inflation rise faster than expected as demand recovers from the coronavirus pandemic, triggering debate on how quickly they should wean their economies off stimulus.

While global commodity inflation has pushed up wholesale prices in Japan, consumer prices have barely risen as companies remain cautious about passing on higher costs to households.

A resurgence in COVID-19 infections forced the government to impose new state of emergency curbs in Olympic host city Tokyo from Monday through August 22, dashing policymakers’ hope for a solid rebound in economic growth in July-September.

In fresh quarterly projections released on Friday, the BOJ cut its economic growth forecast for the fiscal year ending in March 2022 to 3.8% from 4.0% due in part to the new curbs.

It revised up this year’s core CPI forecast to 0.6% from 0.1% largely reflecting the boost from higher energy prices.

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