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Japan's inflation rate remains at 0.6% in July

This file photo shows alcoholic beverages sold at a supermarket in Chiba Prefecture. (Kyodo)

TOKYO (Kyodo) -- Japan's underlying inflation rate was unchanged at 0.6 percent in July, government data showed Friday, still far short of the Bank of Japan's goal of 2 percent.

The year-on-year gain in the nationwide core consumer price index, which excludes volatile fresh food prices, reflected higher utility costs, but falling mobile phone fees and gasoline prices weighed on the inflation rate, the Ministry of Internal Affairs and Communications said.

The core CPI rose for the 31st straight month, reaching 101.5 against the 2015 base of 100.

"There is no change in our view that (consumer prices) are on a moderate upward trend," a ministry official told a press briefing, adding that the government will closely watch the effects of crude oil prices on the index.

Energy costs increased 0.6 percent in the reporting month, with electricity and gas prices rising 2.7 percent and 3.0 percent respectively. Oil product prices dropped 2.7 percent, affected by a 4.3 percent decline in gasoline prices.

Prices for nonperishable foods grew 1.2 percent as ice cream shot up 6.9 percent in price on higher raw material and transportation costs, the ministry said.

Those of household durable goods, including vacuum cleaners and air conditioners, increased 3.8 percent in a sign that consumers are increasingly buying new appliances ahead of the consumption tax hike in October, according to the ministry.

Takeshi Minami, chief economist at the Norinchukin Research Institute, warned of the impact on the Japanese economy from the tax increase to 10 percent from 8 percent, which is widely feared to hurt household and business spending.

"It is hard to expect an upward pressure for prices to gain momentum in the near future given the risk that private consumption may be dampened after the tax rise," Minami said.

The BOJ has downgraded its estimates of growth and inflation over the coming years while saying it will keep interest rates ultralow at least until next spring to boost the economy.

Friday's data also showed that so-called "core-core" consumer prices, excluding both fresh food and energy-related items, rose 0.6 percent in July from a year earlier, picking up from a 0.5 percent rise in June.

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