Japan’s June CPI Eases — Markets Bet BOJ Will Keep Stimulus Alive

TradingKey - Japan’s core consumer price index (CPI), excluding fresh food, rose 3.3% year-over-year in June, down from 3.7% in May — signaling a moderation in inflationary pressure and offering the Bank of Japan (BOJ) more policy flexibility.

[Japan CPI Trends Over the Past Seven Months, Source: MacroMicro]

The slowdown in core CPI was largely driven by softer energy price growth. Energy prices rose 2.9% in June, below the previous month’s level. Food prices (excluding fresh food) climbed 8.2%, up from 7.7% in May, but the overall trend has stabilized. While rising food costs continue to weigh on households, the easing energy prices provide a positive signal for inflation control.

With inflation cooling and U.S. trade policies adding uncertainty, analysts expect the BOJ to avoid premature tightening in order to safeguard economic recovery and export competitiveness.

Institutional Views:

Nomura Securities’ Economic Research Team stated: “The decline in core CPI shows inflationary pressure is easing, supporting the BOJ’s case for maintaining monetary stability.”

MUFG’s Macro Strategy Team noted: “Trade uncertainty is making the BOJ cautious. Near-term rate hike expectations have clearly weakened.”

In summary, Japan’s inflation is gradually cooling, giving policymakers more time to assess the outlook. The likelihood of an imminent rate hike has significantly diminished.