MNI BRIEF: Business Inflation Expectations Slow - BOJ Tankan

Short- and medium-term inflation expectations at Japanese firms slowed and corporate output prices also fell over Q2, the Bank of Japan's June Tankan survey showed Monday.

The reading, however will likely not immediately change the BOJs view due to ongoing pass-through of cost increases. Solid inflation expectations among corporate executives, despite the drop of import prices, which indicates corporate price-setting behavior continues and supports the outlook for a price-wage virtuous cycle, will encourage BOJ officials.

On average, companies saw the annual consumer inflation rate at 2.6% in Q2, slowing from a record high of 2.8% recorded in the March quarter. They also noted a rise of 2.2% rise within three years, which slowed from a record high of 2.3% in March. The five-year inflation rate expectation was unchanged from Q2 at 2.1%.

The survey showed companies on average expect sales prices to rise 3.0% a year from now, down from 3.3% in March. They also saw an increase of 3.8% three
years ahead, also down from 4.0%, and an increase of 4.4% within five years, down from 4.6%.