Japan's Inflation Misses Target Again, But Producer Prices Soar

Japan's inflation picked up in June, but core consumer prices still rose only 1.6% from a year earlier, falling short of the Bank of Japan's 2% target for the fifth consecutive month.

The acceleration was driven in part by a base effect after last year's gasoline subsidy-driven drop, while food inflation cooled as rice prices fell. Core CPI (excluding fresh food) rose to 1.6% in June from 1.4% in May.

However, producer prices - what firms pay at the wholesale level - surged 7.1% year-on-year in June, the fastest pace in more than three years. Analysts say a four-decade-low yen and higher fuel and import costs tied to the Middle East conflict could eventually lead to higher retail prices.

The Bank of Japan is expected to hold rates steady at its next meeting while publishing new quarterly forecasts, but officials will be watching for signs that today's muted consumer inflation turns into broader price pressure.