Japan’s June Core Inflation Likely Slowed but Stayed Above Target, Reuters Poll Shows
Japan’s core inflation likely eased in June but remained above the Bank of Japan’s 2% target, according to a Reuters poll, leaving the central bank in a difficult position as new U.S. trade tariffs add to economic uncertainty.
The Bank of Japan now faces a policy dilemma: whether to continue raising interest rates to curb inflation that has consistently exceeded its target for more than three years, or to pause tightening to protect growth, especially with President Donald Trump’s newly announced 25% tariffs on Japanese imports set to take effect August 1.
A Reuters survey of 17 economists released Friday predicted that the core Consumer Price Index (CPI)—which includes energy but excludes fresh food—rose 3.3% in June year-over-year, down from 3.7% in May.
“Rising rice prices are pushing up costs for processed foods and restaurant meals, but lower gasoline prices in June are likely to dampen the overall inflation rate,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
Core inflation has now stayed above the BOJ’s 2% target for more than three consecutive years, as companies continue to pass on higher costs from raw materials and labor.
The outlook for Japan’s economy was already fragile before the announcement of the U.S. tariffs. GDP contracted in the first quarter as rising prices squeezed consumer spending, and exports declined in May for the first time in eight months, fueling concerns about a possible recession.
A slight majority of economists in a separate June Reuters poll expect the BOJ to hold off on further rate hikes this year.
Japan’s Ministry of Internal Affairs and Communications is scheduled to release the official June CPI data at 8:30 a.m. local time on July 18 (2330 GMT on July 17).
