Japan inflation eases in June under tax hike blow

AP, Friday 25 Jul 2014

Japan's inflation rate eased slightly in June as a sales tax hike stunted demand, the government reported Friday.

The core consumer price index, which does not include prices for fresh foods, rose 3.3 percent in June, down from the 3.4 percent in May, the report said. It was the 13th straight month of inflation, however, after years of sagging prices that sapped the vitality of the world's third largest economy.

Factoring out surging energy costs, such as a 10.6 percent rise in gas prices, the increase was 2.3 percent. Excluding the direct effect of the April 1 increase in the sales tax to 8 percent from 5 percent, the inflation rate was 1.3 percent, the Bank of Japan said.

The central bank has set a 2 percent inflation target, aiming to break Japan out of years of deflation, but forecasts that the rate will remain just above 1 percent for the foreseeable future.

The central bank and government are seeking to spur demand and corporate investment in hopes of restoring Japan to sustained growth. But the need to improve tattered public finances through tax hikes has complicated that strategy.

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