- Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute
The Bank of Japan has been showing surprising resilience since April, when the sales tax was increased to 8%. During the last several months the data was sending promising signs, providing a support for the central bank, which was confident about reaching its 2% inflation target without any additional measures. Nevertheless, weaker inflation for June can hamper its optimism.
The national core measure of inflation eased to 3.3% in June, following a 3.4% increase a month earlier, Japan's Statistics Bureau said on Friday. The broader measure of consumer prices, which does not exclude volatile fresh fruit prices, was seen sliding to 3.6% on an annual basis from 3.7% in May. That was the second straight month of slowing inflation, as a jump in energy costs lost steam, while consumption boost from the tax hike was waning as well. While a slowdown was widely expected by analysts, debates will continue over whether the central bank is overoptimistic about reaching its own ambitious target next fiscal year.
While consumer prices have been constantly rising over the last year, officials and experts have stopped short of declaring an end to a decade-long deflation, saying that growth is still fragile. Domestic consumption shows no convincing signs of a stable recovery amid falling real wages, while shipments remain sluggish, with the business investment being the only bright spot for the BoJ.
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