MNI BRIEF: Japan June CPI Up On Energy; But Seen Revised Down

Japan's June core consumer price index accelerated on higher energy costs, but will likely be revised down in August as the government plans a update to the base year of the series to 2020, making the increase no surprise to Bank of Japan officials, MNI understands.

The nationwide core CPI rose 0.2% y/y in June for the second straight gain following +0.1% in May, which was the first rise in 14 months. The higher core CPI was expected as the Tokyo June core CPI was unchanged in June, improving from -0.2% in May.

The June core-core CPI, excluding fresh food and energy items - the BOJ's preferred gauge of the underlying trend – fell 0.2% y/y after falling 0.2% in May. Energy costs rose 4.6% y/y in June, building on a 4.2% gain in May, but mobile phone charges fell 27.9% y/y in June.

Bank officials continued to keep a close eye on how core CPI affects inflation expectations, which were unchanged after rebounding from the drop caused by coronavirus containment measures.

Prices for eating out, another key BOJ focus, rose 0.3% y/y in June following +0.3% in May, showing that consumers remained cautious. Service prices fell 1.1% y/y in June, which follows a 1.1% decline in May.

Prices for processed foods, accounting for 15% of the total CPI and which BOJ officials are sensitive to, fell 0.1% y/y in June, unchanged from -0.1% in May. Household and durable goods prices rose 1.7% y/y in June, slowing from +2.3% in May, reflecting further hesitancy on purchases.