Japan’s inflation may have peaked, no imminent change seen to BOJ policy

japan’s-inflation-may-have-peaked,-no-imminent-change-seen-to-boj-policy
Japan’s inflation may have peaked, no imminent change seen to BOJ policy

Japan’s core inflation remained above the central bank’s 2% target in June for the 15th consecutive month. However, an index that excludes the impact of energy costs showed a slowdown, indicating that the commodity-driven price pressures may have peaked. Despite this, policymakers believe that wage pressures have not yet reached a level that would require a change in the ultra-loose monetary policy.

While the data suggests that the Bank of Japan (BOJ) may upgrade its inflation forecast for this year, it also relieves pressure on the central bank to begin phasing out its massive monetary stimulus. Analysts predict that cost-push inflation is reaching its peak, and inflation is expected to slow in the coming months, allowing the BOJ to maintain its current policy.

The nationwide core consumer price index (CPI), excluding fresh food costs, rose 3.3% in June compared to the previous year, in line with market expectations. However, the index that excludes both fresh food and fuel costs, which is considered a better measure of trend inflation, increased by 4.2%, slower than the previous month. This indicates a moderation in the rapid pace of price increases driven by companies.

Services prices, an important indicator of inflation driven by higher labor costs, rose 1.6% in June compared to the previous year. This data comes ahead of the BOJ’s policy meeting, where the board will release new projections and discuss Japan’s progress towards achieving its 2% inflation target.

There is speculation in the market that the BOJ may phase out its yield curve control (YCC) policy, which has been in place due to inflation exceeding the target for over a year. However, BOJ Governor Kazuo Ueda has emphasized the need to maintain an ultra-loose policy until inflation shifts from cost-push to demand-driven and wage growth increases.

The key factor for future inflation will be whether companies continue to raise wages and pass on the costs to services prices. If this happens, services prices could exceed expectations. However, inflation excluding food and energy is expected to gradually moderate.

Under the YCC policy, the BOJ guides short-term interest rates and buys government bonds to control the 10-year bond yield. This policy aims to stimulate inflation and achieve the 2% target.

In conclusion, Japan’s core inflation remains above the target, but there are signs of a slowdown in price pressures. While the BOJ may upgrade its inflation forecast, it is unlikely to make any immediate changes to its monetary policy. The focus now is on whether wage pressures will increase and translate into higher services prices.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

Have a tip we should know? tips@rhd.news

Most Read

  1. News
    Pandora Papers Financial Leak Shows Us the Secrets of the World’s Rich and Powerful
    3 years ago
  2. Health
    US Supreme Court Rejects J & J TALC Cancer Case Appeal
    3 years ago
  3. Lifestyle
    9 Habits that Drain your Daily Focus and How to Avoid Them
    3 years ago
  4. BUSINESS
    Women’s Demand for Shapewear – the big Trends
    3 years ago
  5. BUSINESS
    Valentino Launches its Cosmetics Line
    3 years ago
  6. Health
    US Promises to Share 60 million Doses of AstraZeneca Vaccines
    3 years ago
  7. Health
    UK Offers Aid Amid Surging COVID-19 Cases in India
    3 years ago
  8. Sports
    Thousands of fans welcome Charlton funeral cortege at Old Trafford
    8 months ago
  9. News
    Brit left fighting for life after train derails in Argentinia
    8 months ago
  10. BUSINESS
    Dubai faces down airline rivals with $50 bln jet orders
    8 months ago
  11. Sunak
    UK’s Sunak brings back Cameron, sacks Braverman
    8 months ago
  12. Sports
    Man United’s Hojlund, Eriksen withdrawn from Denmark team duty
    8 months ago
  13. Health
    Autumn Sneezing Syndrome is on the rise… here’s what you can do
    8 months ago
  14. Canada
    Canada beat Italy to win Billie Jean King Cup for first time
    8 months ago

Follow @rushhourdaily: