inflation expected to dip in June, rise again later in year
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[July 18, 2014]
By Stanley White
TOKYO (Reuters) - Japan's consumer
price inflation is expected to ease slightly in June as the increase
in import costs from a weak yen fades, but prices are likely to
accelerate later this year if a tight labor market pushes up wages.
Exports in June are forecast to rise moderately from a year ago due
to higher shipments to the United States and China, but economists
say exports are unlikely to grow rapidly as many Japanese companies
have moved much of their production offshore.
Inflation is likely to continue to slow to around 1 percent as the
impact of the weak yen dwindles, but economists say inflation will
pick up again in line with the Bank of Japan's economic outlook.
"The labor market is tight, so I expect inflation to accelerate
later this year," said Hiroaki Muto, senior economist Sumitomo
Mitsui Asset Management Co.
"There is no chance of monetary easing this year, because there are
no signs that inflation will fall below 1 percent."
The nationwide core consumer price index, which includes oil
products but excludes the volatile prices of fresh fruit, vegetables
and seafood, is forecast to have risen 3.3 percent in the year to
June, a Reuters poll of 29 economists found.
That would be slightly slower than a 3.4 percent annual increase in
The yen fell 17.5 percent versus the dollar in 2013 but has traded
in a narrow range versus the dollar this year, so the effect of
higher import prices is starting to fade.
Excluding the impact of a sales tax hike in April, core CPI is
expected to rise 1.3 percent in the year to June from the 1.4
percent annual increase in the previous month.
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The BOJ estimates that the sales tax rise will add 1.7 percentage
points to Japan's annual consumer inflation in April and 2.0 points
from May onwards.
The consumer price inflation data will be released at 8:30 a.m. on
July 25 (1930 ET July 24).
One day earlier, trade data are forecast to show that Japan's
exports rose 1.0 percent in the year to June, a recovery from a 2.7
percent annual decline seen in May.
However, economists do not expect exports to improve much because
structural changes in Japanese industry means companies make fewer
goods domestically and consumers buy more imported products.
Bank of Japan Governor Haruhiko Kuroda has repeatedly expressed
confidence that consumer prices will slow temporarily and then
resume rising, meeting the central bank's 2 percent inflation target
in about a year's time.
(Editing by Eric Meijer)
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