Japan’s core inflation accelerates in June By Reuters

By Leika Kihara

TOKYO (Reuters) – Japan’s core consumer prices rose 2.6% in June from a year earlier, data showed on Friday, accelerating for a second straight month and keeping alive market expectations that the central bank could soon raise interest rates.

The data will be among the factors the Bank of Japan (BOJ) will scrutinise at its policy meeting on July 30-31, when the board will release fresh quarterly forecasts and debate whether to raise interest rates from current near-zero levels.

The increase in the core consumer price index (CPI), which strips away the effect of volatile fresh food prices, compared with a median market forecast for a 2.7% gain and followed the previous month’s 2.5% rise.

Inflation, as measured by another index that excludes both fresh food and fuel, hit 2.2% in June after a 2.1% reading in May, the data showed.

The BOJ exited negative rates and bond yield control in March in a landmark shift away from a decade-long radical stimulus programme.

With inflation exceeding its 2% target for two years, the central bank has also dropped hints that it will raise short-term rates to levels that neither cool nor overheat the economy – seen by analysts as somewhere between 1% and 2%.

Many economists expect the BOJ to raise interest rates to 0.25% this year, though they are divided on whether a hike will come in July or later in the year.