Inflation in Japan’s capital slows in August, stays above BOJ target

By Takahiko Wada and Leika Kihara

TOKYO (Reuters) – Core inflation in Japan’s capital slowed in August but remained well above the central bank’s 2% target, data showed on Friday, keeping policymakers under pressure to phase out decades of massive monetary stimulus.

The data for Tokyo, which is seen as a leading indicator of nationwide trends, adds to recent signs of broadening inflationary pressure in the world’s third-largest economy.

The Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 2.8% in August from a year earlier, compared with a median market forecast for a 2.9% gain.

It followed a 3.0% rise in July and exceeded the Bank of Japan’s 2% target for the 15th straight month.

An index that strips away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of broad price trends, rose 4.0% in August from a year earlier, unchanged from the pace of increase marked in July, the data showed.

A spike in global commodity prices last year drove many Japanese companies to shed their aversion to price hikes and pass on higher costs to households, keeping inflation above the BOJ’s target for longer than policymakers initially expected.

The inflation overshoot led the BOJ to make modest tweaks to its bond yield control policy last month, a move investors saw as a shift away from decades of ultra-loose monetary policy.

But Governor Kazuo Ueda has ruled out the chance of an early exit from ultra-loose policy, saying that it needs to wait until wages rise enough to keep inflation sustainably around 2%.

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