VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Japan's core inflation stayed above the central bank's 2% target in June for the 15th straight month but an index stripping away the effect of energy costs slowed, data showed, suggesting the prolonged commodity-driven price pressures may have peaked.

Yet, with services price growth also slowing last month, policymakers will feel that wage pressures have yet to build up enough to warrant an imminent tweak to the ultra-loose monetary stance.

Services prices, closely watched by policymakers on whether inflation is becoming driven more by higher labour costs, rose 1.6% in June from a year earlier after a 1.7% gain in May.

The data comes ahead of the BOJ's closely-watched policy meeting on July 27-28, when the board will release fresh quarterly projections and discuss how much progress Japan is making towards sustainably achieving its 2% inflation target.

Core inflation in Japan's capital, set for release hours before the BOJ's policy announcement on July 28, also likely slowed sharply in July, according to a Reuters poll.

With inflation having exceeded the BOJ's target for more than a year, markets are simmering with speculation the BOJ could soon phase out its controversial yield curve control (YCC) policy as early as next week.

BOJ Governor Kazuo Ueda has stressed the need to keep policy ultra-loose until the recent cost-push inflation shifts into one driven by robust domestic demand and higher wage growth.

The key would be whether companies will continue offering higher pay next year, similar to this year, and start translating the rise in labour costs to services prices.

"If more firms hike wages and pass on the cost, services prices could overshoot," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"Inflation excluding food and energy will likely moderate ahead, but the pace of slowdown could be gradual."

Under YCC, the BOJ guides short-term interest rates at -0.1% and buys huge amounts of government bonds to cap the 10-year bond yield around 0% as part of efforts to fire up inflation to its 2% target. (Reuters)