“Japan Inflation to Rise as BOJ Considers Rate Hikes: Reuters Poll”, In June, Japan’s core consumer inflation likely increased for the second consecutive month, according to a Reuters poll of 18 economists. This development is expected to maintain pressure on the central bank to consider raising interest rates.
Separate data from the Ministry of Finance will likely show that export growth slowed down year-on-year in June, undershooting import gains and leaving behind a trade deficit.
Data from the internal affairs and communications ministry is expected to show on July 19 that the core Consumer Prices Index, which excludes fresh food, rose 2.7 per cent year-on-year in June, faster than the previous month’s 2.5 per cent rise.
That would mean that inflation has remained above the Bank of Japan’s 2 per cent target for the 27th straight month, concerning the BOJ which reckons inflation is being powered by external cost pressures, rather than the domestic demand which policymakers are trying to encourage.
In Japan, inflation has been fuelled by higher raw materials and fuel import costs, exacerbated by a weak yen.
Normalising monetary policy will need a “virtuous growth cycle” materialising in Japan, the BOJ has said, in which solid wage hikes are accompanied by durable inflation and household consumption.
The data will be scrutinised by the BOJ at its policy-setting meeting on July 30-31 at which the central bank will review its projections for GDP growth and inflation.
Some investors are betting the central bank will raise interest rates in July, while cutting its government bond buying as a step towards normalising monetary policy. Earlier this year the BOJ began unwinding its unconventional policy, raising interest rates in March for the first time since 2007.
