(Bloomberg) -- Japan’s inflation accelerated slightly in June, building on modest gains in wages and providing a touch of encouragement for the Bank of Japan. Energy costs were a big part of the increase.

Key Takeaways

Weakness in inflation -- which remains far from the 2 percent target -- has reduced speculation that the Bank of Japan may start tightening its ultra-loose monetary policy anytime soon. Without rising energy prices, the picture would be bleaker. The next clues to the BOJ’s thinking come on July 31, when policy makers provide updated forecasts on prices and growth. Private economists and investors have questioned the BOJ’s assertion that inflation momentum has been maintained.

Economist Views

• Higher oil prices are likely to help Japan’s inflation but an increase in gasoline prices can start hitting consumers, Junko Nishioka, chief economist at Sumitomo Mitsui Banking Corp., said before the data release.
• Nishioka expects the BOJ to explain further after its next meeting why inflation has struggled to rise in Japan. The bank will likely use the explanation to make the case why it needs to maintain the current monetary easing, she said.
• An increase in inflation in Tokyo in June should have helped national prices go up, according to Masaki Kuwahara, senior economist at Nomura Securities Co. Yet even small improvements won’t be enough for the BOJ to avoid downgrading its price forecasts for this year, he said before the data release.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, Henry Hoenig

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