MNI POLICY: Japan CPI Rise Unchanged, BOJ Remains Cautious

     TOKYO (MNI) - The year-on-year rise in Japan's core consumer price index

was unchanged in July from June, leaving Bank of Japan officials cautious about

their inflation outlook.

     The national average core CPI (excluding fresh food) rose 0.8% on year in

July for the 19th straight year-on-year rise. The pace was unchanged from +0.8%

in June as the positive contribution from processed food prices (+0.02

percentage points) was offset by the negative contribution from overseas holiday

tours (-0.03% points).

     Energy prices continued to support the recent gradual pickup in inflation

while the base-year effect of discounts on mobile communications costs remained.

     BOJ officials expected the core CPI y/y increase to have accelerated in

July as the core CPI in central Tokyo, a leading indicator of the national CPI,

rose 0.8% in July, up from +0.7% in June.

     The next key data is the Tokyo CPI for August due out on Aug. 31.

     In the July national CPI data, BOJ officials were encouraged by higher

goods prices.

     Goods prices excluding volatile fresh food prices rose 1.5% on year in

July, with the pace of increase faster than +1.4% in June. The pace of increase

in overall goods prices accelerated to +1.7% in July from +1.1% in June in the

wake of major rain storms that damaged crops.

     The prices for processed food (canned food, bread, snacks, beverages,

etc.), which accounts for 15% of the total CPI, rose 1.3% on year in July after

+1.1% in June, reflecting higher energy and labor costs.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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