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Investing.com-- Japan’s consumer inflation cooled slightly more than expected in June, although core inflation remained above the Bank of Japan’s annual target, pointing to continued pressure on the central bank to raise interest rates.
Core consumer price index inflation, which excludes volatile fresh food items, grew 3.3% year-on-year in June, government data showed on Friday. The print was slightly below expectations of 3.4% and fell from the 3.7% seen in the prior month.
A core CPI reading that excludes both fresh food and energy costs rose to 3.4% y-o-y in June from 3.3% in the prior month. The print is watched by the BOJ as a gauge of underlying inflation.
Headline CPI cooled to 3.3% in June from 3.5%.
The softer reading was driven chiefly by a dip in fuel and gas prices, which tracked a decline in global oil prices.
But Japanese food inflation grew 7.2% in June, especially as a rice shortage drastically drove up prices of the staple food in recent months.
While the June inflation data did show some cooling, Japanese inflation still remained largely sticky, giving the BOJ impetus to raise interest rates.
But the central bank is expected to delay any decision to hike, especially as Japan’s economy grapples with increased U.S. trade tariffs. President Donald Trump earlier in July said Japan will face a 25% tariff from August 1.
The Japanese economy shrank in the first quarter of 2025, as sticky inflation weighed on private spending, despite the latter being boosted by bumper wage hikes.