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MNI POLICY: Japan June CPI Rise Slows; BOJ Sees Gradual Rise

MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - Japan's core CPI slowed in June, as expected, but Bank of
Japan officials saw enough bright spots in the data to still expect a gradual
rise in inflation ahead, MNI understands.
     Core prices were 0.6% higher on year in June, a 30th straight rise,
decelerating from May's 0.8% and in line with BOJ expectations after data
earlier this month showed Tokyo core CPI slowing to 0.9% y/y in June, after
rising 1.1% in May.
     Better news for the BOJ within the data included higher prices for
processes foods, which accounts for 15% of the total CPI that BOJ officials
focus on, higher by 1.2% on year in June, accelerating from +0.9% in May.
     Mobile phone charges fell 5.8% on year in June, decelerating further from
-4.3% in May. The fall was expected following recent changes to mobile phone
plans, but BOJ officials judged that the downward pressure on the inflation rate
was less than initially expected.
     Less encouraging was the slowdown in prices for dining out, up 1.0% on year
as against a rise of 1.1% in May, suggesting to Bank officials upward pressure
from recent retail price hikes in the sector may have peaked.
     Goods prices excluding volatile fresh food prices rose 0.8% on year in
June, also slowing after a 1.2% gain in May.
     --NO SWIFT UPSIDE
     The BOJ sees the underlying trend still solid, but don't expect a sharp or
swift pick-up in pace in the coming months.
     Although there is no strong causal link between Japan's corporate good
price index and CPI, BOJ officials are certainly aware that June's -0.1% y/y
CGPI print, the first year-on-year drop in 30 months, is less than encouraging
for the overall inflation outlook.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MMJBJI,MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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