Japan is still dealing with high inflation that has consistently been higher than the objective of 2% set by the country's central bank for the past 15 months in a row.
In light of the fact that prices of services have been trending downward over the course of the previous month, experts are of the opinion that the pressure on wage growth is not yet significant enough to justify an adjustment in lax monetary policy.
The Bank of Japan may raise its inflation estimates for the current year, but economists say that this could put the bank under pressure to start winding down its massive stimulus program.
In line with market predictions and a pick-up from May's 3.2% increase, the nationwide core consumer price index (CPI), which does not include fresh food costs, climbed 3.3% year-over-year in June.
The persistent increase in the cost of food and essentials has resulted in an additional load being placed on households as a direct result of rising utility bills. After an increase of 1.7% in May, the cost of providing services saw another year-over-year increase of 1.6% in June.
On the 27th and 28th of July, the Bank of Japan will hold a monetary policy meeting at which new quarterly projections will be released and inflation progress will be discussed. It is also anticipated that Tokyo's core inflation rate will decrease.
Since inflation has been running above the objective set by the central bank for more than a year, market players are actively debating the likelihood of the central bank giving up its yield curve control (YCC) next week.
However, Governor of the Bank of Japan Kazuo Ueda emphasizes that the ultra-loose policy should be maintained until inflation stabilizes and is the outcome of strong domestic demand and growing wages.
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