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Japan Inflation Inches Higher

Japan Inflation Inches HigherJapan Inflation Inches Higher

Japan’s inflation picked up slightly in June, largely because of higher energy costs. There was little to suggest price gains will accelerate toward the 2% target anytime soon, Bloomberg reported. Weakness in inflation has reduced speculation that the Bank of Japan may start tightening its ultra-loose monetary policy. While the BoJ’s yield-curve control program has allowed it to ease back the throttle on bond purchases, monetary policy is harming the profitability of commercial banks and distorting markets. Without rising energy prices, the picture would be bleaker for inflation. The next clues to the BoJ’s thinking come on July 31, when policy makers provide updated forecasts on prices and growth. Private economists and investors have questioned the BoJ’s assertion that inflation momentum has been maintained. “These latest June CPI numbers are going to be another heart breaker for BoJ,” Izumi Devalier, head of Japan economics at Bank of America Merrill Lynch, said on Bloomberg TV after the release. “The labor market continues to tighten and it’s not resulting in meaningful inflation pressures,” Devalier said.

 

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