Inflation in Japan stood at 3.3% in June, in year-on-year terms, in the reading of the evolution of prices that excludes fresh products, indicated this Friday the Japanese government. The consumer price index (CPI) rose slightly from the same May inflation (3.2%), corresponding to economists’ expectations.
Also not including energy, as oil and gas prices are in sharp decline after the 2022 surge, inflation in Japan last month stood at 4.2%, slightly below the peak recorded in May (4.3%), the highest in the last four decades.
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Japanese inflation has shown signs of resistance, as companies are postponing the repercussion of the increase of costs into selling prices. The Bank of Japan (BoJ) is expected to update growth and inflation forecasts at the end of the monetary policy meeting, which takes place this Friday.
Economists said they expected the BoJ significantly increase the inflation forecast for the current financial year 2023/24, which started on 1 April and is currently set at 1.8% excluding fresh produce and 2.5% when excluding fresh produce and energy.
However, despite inflation rising above the 2% target for over a year, the BoJ has maintained its monetary policy so far, as it considers the conditions are not met in the country to achieve this goal on a sustainable basis.
Earlier in the week, BoJ Governor Kazuo Ueda defended this position, dampening market speculation that the Japanese central bank might start tightening monetary policy. already this month. The chief economist for Asia-Pacific at Standard & Poor’s rating agency Louis Kuijs says that raising interest rates, if inflation falls again, could go beyond an unwanted economic downturn and trigger a “fiscal cataclysm”.
The BoJ is likely to adopt, for the time being, a cautious attitudeadded the economist.