TOKYO (Reuters) -Japan’s core inflation rate in July likely slowed from the previous month but remained above the Bank of Japan’s 2% target, a Reuters poll showed, adding to pressure on the central bank to raise interest rates.
The BOJ is weighing whether to continue raising borrowing costs to combat inflation, or hold back to avoid damaging growth as U.S. tariffs cast uncertainty over the economic outlook.
The core consumer price index (CPI), which includes oil products but excludes fresh food prices, was expected to have climbed 3.0% in July from a year earlier, a poll of 20 economists showed on Friday. That figure compared with 3.3% in June.
The slowdown was attributed to lower energy prices but inflation on goods items remained strong, said Junya Takemoto, senior economist at Sumitomo Mitsui Banking Corporation.
“A rapid decline (in inflation) is not expected,” Takemoto said.
Core inflation has now exceeded the BOJ’s 2% target for well over three years, in a sign of mounting price pressure as companies continue to offset rising raw material and labour costs.
Japan’s economy grew much faster than expected in the second quarter, data showed on Friday, helped by a rush of exports ahead of U.S. tariffs taking effect.
Analysts, though, warned global economic uncertainties fuelled by U.S. tariffs could weigh on the world’s fourth-largest economy in the coming months.
BOJ Governor Kazuo Ueda has signalled readiness to keep raising rates but justified going slow on the view that “underlying inflation,” which focuses on domestic demand and wages, remains short of the BOJ’s target. The BOJ’s next rate review is in September.
U.S. Treasury Secretary Scott Bessent said this week that the BOJ is likely to raise rates and that it was behind the curve in tackling inflation risks.
The internal affairs ministry will release July CPI data at 8:30 a.m. on Aug 22 (2330 GMT on Aug 21).
(Reporting by Satoshi Sugiyama; Editing by Kim Coghill)
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