TOKYO (BLOOMBERG) - Japan's key measure of price changes rose so slightly in July, lagging well behind gains in economic growth as the central bank struggles to spur significant improvement in inflation.
Core consumer prices, which exclude fresh food, increased 0.5 per cent from a year earlier. Excluding fresh food and energy, prices climbed 0.1 per cent. Overall, nationwide prices rose 0.4 per cent.
Price increases are still well below the Bank of Japan's 2 per cent target, even as the economy expands. The BOJ was forced to push back the projected timing of meeting the objective for the sixth time at its July policy meeting, despite years of extraordinary monetary easing. Inflation minus fresh food and energy has been mostly flat.
All this means that the BOJ is likely to continue with its stimulus while its counterparts in the US and Europe look to wind back their programmes.
Overall, inflation expectations are not moving too much in either direction, Masamichi Adachi, senior economist at JPMorgan Securities Japan Co, said before the release. A weakening in the yen relative to last year has put upward pressure on the price of durable electric goods, he said, while noting that downward pressure is still apparent across many parts of the economy.
"Mobile communication fees will remain a focus in terms of the inflation outlook," Yuichiro Nagai and Yukito Funakubo of Barclays Securities Japan wrote in a note before the data were released. They said large telecommunication companies may cut prices to compete with the emergence of cheap smartphones.