Japan: Inflation declines in July but remains above target
Latest reading: Inflation came in at 3.1% in July, down from June’s 3.3%. July’s result represented the lowest inflation rate since November 2024.
Meanwhile, core inflation—the main metric tracked by the Bank of Japan (BOJ) that strips out fresh food prices—fell to 3.0% in July from June’s 3.3%. The deceleration was broadly in line with market expectations, and was caused by a drop in energy prices—the first since March 2024—itself largely a result of a high statistical base of comparison created by the government’s subsidy program ending in the same period last year. However, core inflation remained above the BOJ’s 2.0% target, as has consistently been the case since March 2022; and a measure of ‘core-core’ inflation—which strips out both fresh food and energy costs—was steady at 3.4%.
Annual average inflation rose to 3.3% in July (June: 3.2%).
Finally, consumer prices increased 0.19% in July over the previous month, swinging from the 0.10% fall logged in June.
Panelist insight: ING’s Min Joo Kang commented:
“Japan’s July consumer price inflation data was broadly in line with the market consensus. Headline inflation slowed thanks to falling energy and utility prices. Yet, core prices remain sticky and well above 3%. We believe core price trends will prompt the BoJ to hike rates as early as October.”