TOKYO (Reuters) -Japan’s June core inflation likely slowed but remained above the central bank’s 2% target, a Reuters poll showed, keeping it under pressure to resume interest rate hikes as U.S. trade tariffs threaten an already fragile economy.
The Bank of Japan must now weigh whether to continue raising borrowing costs to combat inflation that has exceeded its target for over three years, or hold back to avoid damaging growth as U.S. President Donald Trump’s 25% tariffs on Japanese goods add fresh economic uncertainty.
The core consumer price index (CPI), which includes oil products but excludes fresh food prices, was expected to climb 3.3% in June from a year earlier, a poll of 17 economists showed on Friday. That figure compared with 3.7% in May.
“While the surge in rice prices is spreading to prepared foods and restaurants, gasoline price cuts in June are expected to contribute to a slowdown in the year-on-year rate of increase,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
Core inflation has now exceeded the BOJ’s 2% target every month for well over three years, in a sign of mounting price pressure as companies continue to offset rising raw material and labour costs.
The Japanese economy was already fragile even before factoring in the impact from the higher trade tariffs. Trump this week announced a 25% tariff on goods from Japan starting August 1.
Japan’s economy shrank in the first quarter as rising living costs hurt consumption. Exports fell in May for the first time in eight months, stoking recession fears.
A slight majority in a June Reuters poll of economists saw the bank forgoing another rate hike this year.
The internal affairs ministry will release June CPI data at 8:30 a.m. on July 18 (2330 GMT on July 17).
(Reporting by Satoshi Sugiyama; Editing by Saad Sayeed)
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