Japan core inflation june rate rises to 1.6% as oil costs feed through
Japan’s core inflation rose to 1.6% in June, matching Reuters-polled forecasts as oil imports and a weak yen lifted price pressure.
By Jordan Bell · Startups & Deals Reporter
· 3 min read
Japan core inflation june data showed price pressure picking up again, with the core consumer inflation rate rising to 1.6% as higher oil costs fed into the economy. For investors, the move matters because sticky inflation can shape expectations for Bank of Japan interest-rate policy and the yen.
CNBC reported that the June core inflation reading, which excludes fresh food prices, was the first increase since March. The 1.6% rate matched the forecast from economists surveyed by Reuters.
Headline inflation, the broad measure that includes more categories, rose to 1.7% in June from 1.5% in May, according to CNBC. A narrower gauge often called “core-core” inflation, which excludes both fresh food and energy prices, eased to 1.7%, its lowest level since August 2022.
What is Japan core inflation?
Japan’s core inflation measure strips out fresh food because those prices can swing sharply due to weather or supply disruptions. The core-core measure removes both fresh food and energy, giving policymakers another view of underlying price trends outside volatile categories.
The latest inflation mix points to energy as a key driver. Japan has faced higher energy costs as the Middle East crisis has affected supplies, CNBC reported. A weaker yen has added pressure by making imported goods more expensive when priced back into Japan’s currency.
Trade figures released Wednesday showed the value of Japan’s petroleum imports jumped by more than 59% from a year earlier, according to CNBC. That matters because Japan relies heavily on foreign energy: the International Energy Agency says the country meets more than 87% of its energy needs through imports.
A weak currency can push inflation higher through import prices. If the yen falls, Japanese buyers generally need more yen to pay for the same dollar-priced goods, including oil and other commodities. Those higher input costs can then move through to companies and consumers.
The yen touched 163.23 against the dollar on Tuesday, a multi-decade low, CNBC reported. The currency was hovering near the 163 level afterward.
How could this affect the Bank of Japan?
Reuters reported Wednesday, citing people familiar with the Bank of Japan’s thinking, that the central bank remains alert to inflation risks that could lead to faster rate increases than markets expect. The report said some within the BOJ see room for quicker hikes if a weak yen and higher fuel costs tied to the Iran conflict lift inflation faster than projected.
Interest-rate increases can affect investors across currencies, bonds and equities. Higher rates tend to support a currency by making returns on local-currency assets more attractive, but they can also raise borrowing costs for companies and households.
For now, the reported data show a split picture: energy and import costs are keeping pressure on consumer prices, while the core-core measure has cooled to its lowest level in nearly four years. That gives investors a reason to watch both oil prices and the yen alongside the BOJ’s next signals.
This story draws on original reporting from CNBC.
