The core-core at 1.9% against a 1.8% forecast is the most significant number in the release for BOJ watchers, as it is the measure the board treats as the clearest read on underlying trend inflation. A move from 1.6% to 1.9% in a single month, combined with wholesale inflation already at a three-year high of 6.3%, suggests the pass-through from the energy shock is now running ahead of earlier estimates. That dynamic compresses the board’s room to pause at July. The dissenting voice from Norinchukin’s Takeshi Minami, questioning whether energy-driven inflation can sustain a push toward 3%, is worth tracking as a counterweight: if US and European inflation concerns continue to ease and oil prices soften, the external impulse driving Tokyo prices could fade faster than the hawks expect. For JPY, a core-core print above forecast at a moment when the BOJ has just raised rates to a 31-year high is unambiguously supportive at the margin.
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Tokyo core-core CPI rose to 1.9% in June as energy-driven inflation began spreading to food and other goods, keeping a July BOJ hike firmly in view.
Summary:
- Tokyo headline CPI rose 1.7% year-on-year in June, in line with forecasts and up from 1.4% in May
- Core CPI, excluding fresh food, rose 1.6%, matching forecasts and accelerating from 1.3% in May, though remaining below the BOJ’s 2% target for a fifth consecutive month
- The core-core index, stripping out both fresh food and energy, rose 1.9%, beating the 1.8% forecast and accelerating from 1.6% in May
- Reuters cites Daiwa Institute of Research economist Kanako Nakamura saying the Middle East situation is spreading through energy costs into electricity and gas, with price pressures beginning to move beyond energy into food and other non-energy items
- The data will be among the factors the BOJ scrutinises at its July policy meeting, when the board will also conduct a quarterly review of growth and price forecasts
- Norinchukin Research Institute chief economist Takeshi Minami (again, via Reuters) expressed doubt that energy-driven inflation would push core CPI as high as 3% as the BOJ projects, suggesting the central bank may be overly cautious about inflation risks given easing price pressures in the US and Europe
Tokyo’s core inflation accelerated more than expected in June as price pressures from the Middle East energy shock began spreading beyond fuel into food and a wider range of consumer goods, keeping the Bank of Japan on track to weigh another interest rate increase at its July policy meeting.
The core-core index, which strips out both fresh food and energy and is the measure the BOJ treats as the most reliable gauge of underlying trend inflation, rose 1.9% in June from a year earlier, beating the 1.8% forecast and accelerating sharply from 1.6% in May. Headline CPI rose 1.7%, in line with expectations and up from 1.4%, while core CPI, which excludes only fresh food, matched its 1.6% forecast and accelerated from 1.3%, though it remained below the BOJ’s 2% target for a fifth straight month.
Kanako Nakamura, economist at the Daiwa Institute of Research, said the Middle East conflict is feeding higher crude oil costs through to electricity and gas prices, and that the June data signals the pass-through is now moving into non-energy categories. The pick-up in trend inflation this month suggests price pressures are beginning to spread beyond energy to food and other items, she said, a dynamic that carries more weight for the BOJ than energy-driven headline moves alone.
The data arrives weeks after the BOJ raised its policy rate to 1%, a 31-year high, in a landmark step in its normalisation campaign. The board is due to hold a quarterly review of growth and price forecasts at its July meeting, and the Tokyo CPI print will sit alongside wholesale inflation data, already at a three-year high of 6.3% in May, as the committee assesses whether to move again.
Not all analysts share the hawks’ confidence. Takeshi Minami, chief economist at Norinchukin Research Institute, said he doubts energy-driven inflation can push core CPI as high as 3% as the BOJ projects, particularly with price pressures easing in the United States and Europe. The BOJ, he suggested, may be overly cautious about the inflation outlook.
Bank of Japan Governor Ueda
