MNI POLICY: Tokyo CPI Picks Up; BOJ Cautious Over Inflation

     TOKYO (MNI) - The pace of the annual inflation rate in Tokyo, a leading

indicator of the national average, accelerated slightly in July from the

previous month, but the gradual pickup is keeping Bank of Japan officials to

remain cautious about the price outlook.

     At its two-day policy meeting ending on July 31, the BOJ is expected to

keep its view that the momentum toward achieving the 2% inflation target is

"maintained" as upward pressure on prices stemming from the improving output gap

remains intact.

     In central Tokyo, the core consumer price index excluding fresh food rose

0.8% on year in July for the 13th straight year-on-year rise, with the pace of

increase accelerating from +0.7% in June, government data released Friday

showed.

     The core CPI rise was due mainly to higher prices for processed food (+0.8%

in July vs. +0.6% in June) and rents (+0.3% in July vs. unchanged in June).

     The core-core CPI (excluding fresh food and energy) -- a key indicator of

the underlying trend of inflation -- rose 0.5% on year in July, also up from

+0.4% in June.

     The CPI in the capital is a leading indicator of the national CPI due out

on Aug. 24. It indicates that the core CPI in July will rise from +0.8% on year

in June.

--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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