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Japan's June core inflation rate slows as oil prices fall

A customer looks at vegetables at a supermarket in Tokyo on July 16, 2019. (Kyodo)

TOKYO (Kyod) -- Japan's core consumer prices rose 0.6 percent from a year earlier in June, but the pace of growth was the slowest in nearly two years on falling oil prices, government data showed Friday.

The core consumer price index, excluding volatile fresh food prices, increased for the 30th straight month after rising 0.8 percent in May, according to the Ministry of Internal Affairs and Communications.

The country's underlying inflation had been picking up in recent months due partly to rising energy costs. But gasoline prices fell 2.7 percent year on year in June -- the first decline in four months -- as fears over growing trade tensions between the United States and China weighed on crude oil prices, a ministry official said.

The 0.6 percent growth in the core CPI in June was the weakest since 0.5 percent in July 2017 and remained far below the Bank of Japan's 2 percent inflation target.

Electricity prices climbed 2.5 percent and city gas 5.0 percent in June, but the growth slowed from 3.6 percent and 6.4 percent in the previous month, respectively.

Mobile phone fees fell 5.8 percent as major wireless carriers lowered charges under pressure from the government, which claims the fees remain too high in Japan compared with other countries.

Meanwhile, prices of air conditioners increased 6.3 percent as electric appliance makers started to sell their latest products earlier than usual this year, the ministry official said.

Prices for overseas package tours expanded 6.2 percent amid robust demand from Japanese travelers while accommodation fees climbed 2.1 percent as the number of inbound tourists to Japan continued to increase.

"Consumption remained tepid as household income has not improved following annual wage negotiations in the spring while summer bonuses somewhat weakened despite a labor shortage," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

Major Japanese companies were reluctant to increase wages due to uncertainty over the global economy amid trade tensions between Washington and Beijing as well as China's economic slowdown.

He added it seems difficult to expect the upward momentum in prices to reach the BOJ's 2 percent target with the government's free preschool education program starting in October further capping the country's inflation.

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