* Nationwide core CPI up +3.3 pct in June vs f'cast 3.3 pct
* Consumer inflation slows to 1.3 pct excluding tax hike
* Slowdown in inflation in line with BOJ's projection
By Leika Kihara
TOKYO, July 25 Japan's core consumer inflation
eased slightly in the year to June as an increase in import
costs from a weak yen faded, highlighting the challenges the
central bank faces in meeting its 2 percent inflation target
sometime next year.
But the slowdown comes as no surprise to the Bank of Japan,
which has said inflation will continue to slow to around 1
percent in coming months as the impact of the weak yen dwindles,
before it picks up again as a tight labour market lifts wages.
The nationwide core consumer price index, which excludes
volatile prices of fresh food but includes prices of oil
products, rose 3.3 percent in June from a year earlier, data
from the Ministry of Internal Affairs and Communications showed
That matched the median market forecast and followed a 3.4
percent gain in the year to May.
Excluding the impact of a sales tax hike that kicked off in
April, core CPI rose 1.3 percent in the year to June, slower
than the 1.4 percent increase in the year to May.
The BOJ has stressed that Japan is on track to meet its 2
percent inflation target, as improvements in the economy allow
more firms to raise prices without scaring away consumers.
"The conquest of deflation in Japan is now in sight," BOJ
Deputy Governor Hiroshi Nakaso said on Wednesday, signalling his
confidence for a sustained recovery.
But many analysts still doubt whether inflation will
accelerate as quickly as the BOJ projects given that the boost
to prices from the weak yen will soon start to fade.
The BOJ argues that tighter labour markets will nudge up
wages and help sustain price rises, although it is uncertain
whether companies will raise wages enough to make up for the
loss of household spending power from the tax hike and
The BOJ has estimated that the sales tax hike - to 8 percent
from 5 percent on April 1 - would add 1.7 percentage points to
annual consumer inflation in April, and 2.0 points from the
following month. The internal affairs ministry does not provide
The BOJ has stood pat on monetary policy since deploying an
intense burst of stimulus in April last year, when it pledged to
double base money via aggressive asset purchases to accelerate
inflation in two years and end Japan's decades of deflation.
(Reporting by Leika Kihara; Editing by Eric Meijer)