JAPAN TODAY



 

Core consumer prices in Japan rose 2.4 percent in July from a year earlier, marking the sharpest increase in about seven and half years amid surging material and energy prices, government data showed Friday.

The nationwide core consumer price index, excluding volatile fresh food items, was up for the 11th consecutive month, the Ministry of Internal Affairs and Communications said.

The rise was the sharpest since December 2014, when the index hit 2.5 percent after a consumption tax hike in April that year. Without the effect of that tax increase, July's core CPI was the highest since August 2008, according to the ministry.

The key gauge of inflation exceeded the Bank of Japan's 2 percent target for the fourth straight month on the back of higher crude oil prices driven by Russia's invasion of Ukraine and a weak yen.

Despite the CPI remaining above its target, the BOJ is likely to maintain its ultralow monetary policy, unlike other major central banks that have started to raise interest rates to curb inflation, analysts said.

"The inflationary pressure is not being driven by strong demand. Rather, it is caused by rising import prices on the back of persistently high resource and grain prices as well as the yen's depreciation," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

The BOJ is expected to maintain its policy for the time being as it believes the current inflation, which has not been accompanied by wage increases, will only be temporary, Minami added.

Among the 522 items in the CPI basket, prices rose for 376, remained flat for 45 and dropped for 101, a government official said.

Food prices, excluding perishable items, rose 3.7 percent, the largest increase since March 2015.

Energy prices including gas and electricity climbed 16.2 percent from a year earlier, the data showed.

Government subsidies to oil wholesalers to contain gasoline and kerosene prices limited the rise in the core CPI.

Prices for kerosene climbed 19.6 percent from a year earlier and those for gasoline rose 8.3 percent, with the pace of increase for both slowing from the previous month. City gas jumped 24.3 percent from a year earlier.

Mobile phone prices surged 14.7 percent, largely due to hikes for iPhones and other smartphones, the ministry said.

The official pointed to the sharp rises in food and energy prices as the main factors pushing up the core CPI.

"We will continue to closely monitor energy and food price developments," he said.

The core-core CPI, excluding both energy and fresh food items, rose 1.2 percent, marking the fourth straight monthly increase.



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