28.07.201405:57:48UTC+00Slowing inflation persists in Japan for second month

Concerns whether the Bank of Japan (BoJ) will meet its 2% inflation target are once again mounting behind figures showing back to back months of a slower pace in the increase of core prices.

According to data, the nationwide rate for the climb of the core consumer price index (CPI) in June was at 1.3% to indicate a lower increase from the previous months. CPI was at 1.4% the month before in May and at a six year best of 1.5% in April. The biggest gains could be attributed to the weakening of the yen, which has lost more than 20% of its value against several currencies since November 2012.

The country’s central bank set 2% as the ideal level for inflation of core consumer products in April last year. Since then, officials have been maintaining low interest rests to stabilize the economy and promote spending and investments in what is the third biggest economy in the world. Bank governor Haruhiko Kuroda warned last month that CPI may fall to around 1% during the summer season, but added that he expects it to pick up to near 2% with help from income gains during the latter part of the fiscal year that ends in March.

When prices of more than 700 items included in the CPI was analyzed, however, it showed that the prices of a majority of them first fell before climbing in June. A real time index from the University of Tokyo that averages daily supermarket products has shown a downward trend since April making some analysts pessimistic about the central bank’s strategy. Citi’s chief economist in Japan Kiichi Murashima says that, “We remain sceptical that inflation dynamics that the BoJ has been expecting to happen, will materialise.”