Japan's Core Inflation Hits 1.6%, But Remains Below BOJ Target

Japan's core consumer inflation accelerated in June, but remained below the Bank of Japan's 2% target for the fifth consecutive month. The core Consumer Price Index (CPI), which excludes volatile fresh food prices, rose 1.6% year-on-year in June, matching market expectations and quickening from a 1.4% increase in May.

The increase was partly driven by the base effect of last year's sharp decline in gasoline prices following government subsidies. Food inflation eased as rice prices fell, while service inflation slowed to 1.2% in June from 1.4% in May despite continued wage growth.

An index excluding both fresh food and fuel, a gauge closely watched by the Bank of Japan for underlying inflation, rose 1.7% year-on-year, easing from 1.8% in May.