MNI BRIEF: Japan July Tokyo Core CPI Rises 2.2% Vs. June's 2.1%

Tokyo's core inflation rate accelerated to 2.2% y/y in July from June’s 2.1%, the third straight increase and above 2% for the second straight month, data from the Ministry of Internal Affairs and Communications showed on Friday.

A more significant contribution from energy prices (+0.72 pp vs. 0.38 pp) drove July's rise. Core CPI also printed within Bank of Japan forecasts, which expected inflation data to rise as corporate pass-through of cost increases continued on the back of the weak yen. Energy price rose 14.5% y/y in July vs. +7.5% in June.

The core-core CPI (excluding fresh food and energy) – a key indicator in the underlying trend of inflation – rose 1.5% y/y in July, decelerating from June's 1.8% and stayed below the bank's 2% target for the fourth straight month.

Tokyo saw processed food prices, a key BOJ focus, rise 2.7% in July, slowing from 3.7% in June, while services prices rose 0.5% y/y in July, also slowing from June's 0.9%.

The BOJ will closely watch private consumption and its impact on wage hikes as it contemplates further hikes this year. (See MNI POLICY: Consumption Risk Could Make BOJ Hike Harder)