Japan: Inflation remains steady in July
Inflation held steady at June’s 3.3% in July, exceeding market expectations. Food plus culture and recreation prices rose at a faster pace than in the prior month, while fuel, light and water charges fell at a speedier rate.
Annual average inflation rose to 3.5% in July (June: 3.4%). Meanwhile, core inflation fell to 3.1% in July, from June’s 3.2% and matching market expectations.
Lastly, consumer prices rose 0.45% from the previous month in July, accelerating from the 0.07% rise recorded in June.
Looking ahead, our panelists expect inflation to cool in the coming quarters, dipping below the Bank of Japan’s 2.0% target in Q2 2024. Domestic demand remains weak, with GDP figures released on 15 August showing that private spending contracted in Q2; the effect of rising wages was canceled out by elevated inflation. A key factor to watch ahead is whether the government extends subsidies for electricity and gas, which are due to expire at the end of September. The government will reportedly make a decision in the coming weeks.