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Economy

Japan's core inflation rate unchanged at 0.7% rise in May

TOKYO (Kyodo) -- Japan's underlying inflation rate was unchanged in May at a 0.7 percent rise, government data showed Friday, underscoring the difficulty the Bank of Japan is having in raising stagnant prices.

The year-on-year gain in the nationwide core consumer price index, which excludes volatile fresh food prices, released by the Ministry of Internal Affairs and Communications matched market forecasts to remain the same as April.

Higher energy costs and price hikes by restaurants pushed up prices for the 17th straight month, bringing the index to 101.0 against the 2015 base of 100.

But core inflation remains far below the 2 percent target being pursued by the BOJ and Prime Minister Shinzo Abe in a bid to prevent a relapse into growth-stunting deflation.

This comes despite a strengthening economy thanks to robust export demand, with corporate earnings at historic highs and unemployment near the lowest level in 25 years.

Gross domestic product expanded for eight straight quarters, the longest stretch since the late 1980s asset bubble economy, before shrinking slightly in the January-March quarter.

BOJ Governor Haruhiko Kuroda last week admitted price gains were weakening somewhat but stressed that rising labor costs would push companies to hike the prices of goods and services down the line.

"I believe momentum toward our 2 percent inflation target remains in place," he said after a policy meeting in which the central bank decided to maintain aggressive monetary easing.

So far, companies have remained reluctant to raise prices for fear of chasing away frugal consumers, opting instead to deal with the labor crunch by optimizing their business hours and ramping up automation.

Energy costs that have risen amid climbing crude oil prices account for a large part of what gains prices have made. Excluding both fresh food and energy-related items, so-called "core-core" consumer prices rose 0.3 percent in May from a year earlier, slowing from a 0.4 percent rise in April.

 

 

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