Japan’s core consumer prices stayed flat in August compared with the same month last year, snapping a 12-month streak of successive declines.
Data released by the Statistics Bureau of Japan on Friday showed that the consumer price index (CPI) for all items, barring volatile fresh food prices, was unchanged on a year-on-year basis in August. The index was boosted by rising fuel prices, furniture and household utensils prices and culture and recreation prices.
Core inflation still remained well below the Bank of Japan’s (BOJ) target of 2% inflation before it considers a rate hike.
“The Bank will continue with Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control, aiming to achieve the price stability target of 2%, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2% and stays above the target in a stable manner,” the BOJ had said earlier this week.
CPI for all items fell 0.4% in August compared with the same month last year, primarily due to weaker prices of fresh food items.
According to Daiwa Institute of Research (DIR), core CPI is expected to rise moderately on a year-on-year basis. Analysts at the firm expect demand for services that require face-to-face contact and movement will gradually recover if the request for shortened working hours and leave of absence from restaurants due to the Covid-19 pandemic is lifted.
However, reducing mobile phone communication charges will continue to hold back inflation, DIR analysts said in a note.
The Japanese yen has of late benefitted from the risk-off sentiment in the market. Following the release of the data on Friday, the Japanese yen lost ground to the US dollar. In late afternoon trading in Tokyo, the USD/JPY was trading 0.20% at 110.50.