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Investing.com-- Japanese consumer price index inflation cooled as expected in August, while underlying inflation also eased but remained well above the Bank of Japan’s annual target range.
Friday’s reading came just hours before the conclusion of a BOJ meeting, where the central bank is widely expected to keep interest rates unchanged around 0.5%.
Headline CPI inflation fell to 2.7% year-on-year in August from 3.1% in the prior month, government data showed.
National core CPI, which excludes volatile fresh food prices, fell to 2.7% y-o-y in August as expected, also retreating from a 3.1% print in July.
A core inflation reading that excludes both fresh food and energy prices fell to 3.3% y-o-y in August from 3.4% in the prior month, remaining largely sticky and well above the BOJ’s 2% annual target. The reading is closely watched by the BOJ as a gauge of underlying inflation.
Food prices were among the biggest contributors to CPI inflation, as were fuel and utilities. But this was offset by a sustained decline in electricity prices, amid continued subsidy support from Tokyo.
The BOJ is widely expected to keep interest rates unchanged later in the day, as the central bank grapples with heightened political uncertainty in the wake of Prime Minister Shigeru Ishiba’s abrupt resignation this month.
Uncertainty over the full impact of U.S. trade tariffs on Japan is also expected to keep the BOJ from hiking rates in the near-term.
But sticky inflation, especially in underlying prices, could keep the BOJ geared towards an eventual rate hike.