Japan's Inflation Stalls Below BOJ Target Amid Rising Producer Prices

Japan's inflation picked up in June, but core consumer prices still rose only 1.6% from a year earlier, under the Bank of Japan’s 2% target for a fifth straight month, according to Reuters.

The acceleration was largely driven by a base effect after last year’s gasoline subsidy-driven drop, while food inflation cooled as rice prices fell. Measures the BOJ watches to judge underlying inflation also softened: the index excluding fresh food and fuel eased to 1.7% from 1.8%, and service inflation slowed to 1.2% from 1.4% despite steady wage gains.

However, producer prices, what firms pay at the wholesale level, rose 7.1% year-on-year in June, the fastest pace in more than three years, according to Reuters. Analysts say a four-decade-low yen and higher fuel and import costs tied to the Middle East conflict could take time, then show up at the checkout as supply contracts renew and retailers reset shelf prices.