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Tokyo Inflation Swells to 1.7% % in June, Adding Pressure on BOJ

Consumer prices in Japan's capital rose 1.7% year over year in June, accelerating from 1.4% the previous month, keeping pressure on the Bank of Japan as it continues its tightening cycle.The latest print was in line with the Trading Economics forecast of 1.7%, but remained below the BOJ's 2% price stability target.The headline Tokyo consumer price index stood at 112.7 against a 2020 base of 100 unchanged from May, but up from 110.8 in June 2025.On a seasonally adjusted basis, prices rose 0.3% from May, also faster than the 0.2% increase between April and May.Core CPI, which strips out fresh food items, climbed 1.6% in June from a year earlier, quickening from the 1.3% growth in May. The so-called "core-core CPI," which excludes both fresh food and energy prices, edged up 1.9%, also picking up from 1.6% the previous month.In June, food prices excluding fresh items rose 3.9%, with meat prices up 6.3% and confectionery items up 4.9%.Housing costs climbed 2.1%, with rents up 1.3% a year earlier. Healthcare costs swung to a 1.5% gain in June from flat movement in May. Transport and communications rose 3%, slowing from 3.3% in May.Childcare fees, however, fell a sharp 100% year over year, reflecting the government's move to ease costs on childbirth, childcare and education.Earlier this month, Japan launched a program allowing any child to enroll in nurseries, regardless of their parents' employment status. To fund this, along with child allowances and a 100,000-yen grant for pregnant women, corporate employees will pay an average of 500 yen per month starting in fiscal 2026.These measures trimmed 0.49 percentage points from Tokyo's overall CPI.Elsewhere, energy continued to fall in June, with prices dropping 2.3% year over year, although the pace of decline narrowed from 3.7% in May as gasoline prices fell at a softer rate of 1.3% from the 8.1% drop in May due to government subsidies.ING Think analysts on June 19 said, "The government's price cap on gasoline and renewed utility subsidies should keep inflation below 2%."Tokyo's CPI figures are closely watched as an indicator of nationwide trends. In May, Japan's national headline inflation ticked up to 1.5% from 1.4% in April, but missed the Trading Economics forecast of 1.6%.Core CPI rose 1.4% year over year in May, unchanged from April's reading, while core-core CPI inflation eased slightly to 1.8% from 1.9% in April, falling below the Trading Economics forecast of 1.9%.The Tokyo data arrives days after the BOJ raised its policy rate by 25 basis points to 1.0%, the highest level since 1995.In a speech on Wednesday, BOJ Governor Kazuo Ueda reiterated the risk of inflation exceeding the central bank's 2% target."Given that the underlying inflation rate is approaching 2% and the current monetary environment is accommodative, we believe that we will continue to raise the policy interest rate and adjust the degree of monetary easing in accordance with economic, price, and financial conditions," Ueda said in his prepared speech to the National Shinkin Bank Convention.The timing of the adjustments will depend on the impact of the Middle East conflict on the Japanese economy, Ueda said.