Japan’s inflation rises speedily

Japan’s core consumer prices experienced a faster increase in June, marking the 15th consecutive month above the central bank’s target. Official data revealed that core consumer inflation reached 3.3 percent year-on-year last month, compared to 3.2 percent in May. However, “core core” inflation, excluding fresh food and fuel prices, showed a slight deceleration to 4.2 percent from a 4.3 percent rise in May.

The Bank of Japan (BOJ) is scheduled to announce its latest decision on interest rates next week, with most analysts expecting the benchmark rate to remain unchanged at -0.1 percent. The BOJ is likely to maintain its ultra-loose monetary policy, distinguishing its approach from other central banks that are raising rates to curb inflation.

Economist Masamichi Adachi of UBS Securities stated that the current inflation figures do not indicate any major policy shifts by the BOJ. He predicts that inflation will slow in the future, as the price gains driven by imports start to taper off.

Despite reaching a four-decade high and surpassing the BOJ’s long-term goal of 2 percent, Japan’s inflation remains less severe compared to countries like the United States and the United Kingdom. Japan has oscillated between periods of meagre price growth and deflation since the bursting of a large asset bubble in the early 1990s.

To stimulate the world’s third-largest economy, successive central banks have implemented ultra-low and negative interest rates, albeit with limited success. As the current inflationary pressures persist, the BOJ’s cautious approach to interest rates aims to navigate the complex economic landscape while supporting Japan’s economic recovery.