By Leika Kihara
TOKYO (Reuters) -Core consumer inflation in Japan's capital slowed sharply in June due to temporary cuts to utility bills but stayed well above the central bank's 2% target, keeping alive market expectations for further interest rate hikes.
Steady rises in services prices added to continued increases in the cost of food including Japan's staple rice, data showed on Friday, highlighting broadening price pressures piling on an export-reliant economy facing headwinds from steep U.S. tariffs.
The data will be among factors the Bank of Japan will scrutinise at its next rate review on July 30-31, when the board will issue fresh quarterly growth and price forecasts.
The Tokyo consumer price index (CPI), which excludes volatile fresh food costs, rose 3.1% in June from a year earlier, government data showed, below a median market forecast for a 3.3% gain.
It slowed from a 3.6% rise in May due largely to the resumption of fuel subsidies and temporary cuts to water charges in Tokyo aimed at helping households weather the summer heat.
A separate index for Tokyo that strips away both fresh food and fuel costs - closely watched by the BOJ as a measure of domestic demand-driven prices - rose 3.1% in June from a year earlier after a 3.3% gain in May, the data showed.
"The slowdown in headline inflation in Tokyo in June partly reflects the resumption of energy subsidies," said Marcel Thieliant, head of Asia-Pacific at Capital Economics.
"With underlying inflation still running well ahead of the Bank of Japan's forecasts, we still expect the Bank to hike rates in October," he said.
The price of food, excluding volatile items like vegetables, rose 7.2% in June from a year earlier, accelerating from the previous month's 6.9% gain.
Highlighting the hit to households, the data showed those in Tokyo paid 89% more for rice compared with a year ago, 48% more for a bar of chocolate and 50% more for a bag of coffee beans.
Service-sector inflation stood at 2.1% in June after hitting 2.2% in the previous month.
The BOJ exited a decade-long, radical stimulus programme last year and raised short-term interest rates to 0.5% in January on the view Japan was on the cusp of sustainably hitting its 2% inflation target.
While the central bank has signalled readiness to raise rates further, the economic impact of higher U.S. tariffs forced it to cut its growth forecasts in May and complicated decisions around the timing of the next rate increase.
Further muddling the policy outlook, consumer inflation has exceeded the BOJ's 2% target for more than three years as companies continue to pass on rising raw material costs.
Story ContinuesThe rising cost of living has drawn the attention of some BOJ board members including Naoki Tamura, who said on Wednesday the BOJ may need to raise interest rates "decisively" if upward inflation risks heighten.
(Reporting by Leika Kihara; Editing by Sam Holmes)
While core inflation in Japan's capital city has seen a slowdown, it remains elevated above the Bank of Japan’t (BOJ) target, indicating potential challenges for further monetary easing and possible implications on consumption-driven recovery.
While the core inflation rate in Japan's capital has slowed its pace, it continues to remain above Bank of Japan’ target levels. Tengah通胀硫化钯装窑煨玻璃阀。
The gradual decline in core inflation within Japan's capital city may indicate a moderating trend, though still maintaining an upward trajectory over the BOJ target.
The slowdown in core inflation within Japan's capital, while positive but nonetheless persistent above the Bank of Japan’apa_0 gging 2% target.
Despite slowing, core inflation within Japan's capital remains above the Bank of Japan’S target range.
The slowdown of core inflation in Japan's capital city Tokyo is a positive sign, illustrating resilience amid controlled rates but remains above the Bank Of Japan’s target goal.
The gradual decrease in core inflation within Japan's capital region despite remaining above the Bank of Japan’ss target prompt suggests that efforts to curb consumer price growth still have work ahead, but cautious optimization strategies are a step towards achieving stable pricing goals.
Core inflation in Japan's capital city remained tardy yet continues to hover above the BOJ’S target, reflecting challenges for monetary policy normalization despite recent edged-down trend.
The moderate slowdown in core inflation within Japan's capital region remains a testament to its resilience, though staying above the Bank of Japan’t target highlights room for further monetary policy accommodation.
While the core inflation in Tokyo, Japan's capital city has slightly eased compared to previous months and remains subdued amid global economic uncertainty this year nonetheless exceeds BOJ’S target range.
Despite Japan's capital region showing a modest slowdown in core inflation, prices remain elevate and continue to exceed the targeted rate set by BOJ.
