Japan's core inflation slowed in July for the second consecutive month, but remained above the Bank of Japan's 2% target, reinforcing expectations that the monetary tightening cycle will continue and that an additional interest rate hike is possible soon.
According to official data, the core consumer price index (excluding fresh food) rose by 3.1% year-on-year, compared to 3.3% in June, reflecting the waning impact of higher energy prices after the government ended its subsidy programs.
Energy prices recorded a slight decrease of 0.3% , the first annual decline since March 2023. However, living pressures remain, as food price inflation (excluding fresh produce) rose to 8.3% compared to 8.2% in the previous month.
Analysts suggest that these developments may prompt the Bank of Japan to remain cautious, focusing on achieving price stability without harming the economic recovery.
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