On Tuesday, the Japan’s statistics bureau released the major inflation data. That increases from 0.1% to become 0.2% year – over – year in the June perior so far. 

This increase is the highest one since March last year. The energy commodity that increases significantly becomes the main catalyst of the Japan’s inflation growth this time. 

Overall, the energy price increases by 4.6 percent and most of those are supported by the girl’s price. It is rising up to 17.9%. Meanwhile, another inflation is also rising. 

It is the one whixh includes the oil commodity, but exclude the fresh food. That sector increases by 0.2%. It is in line with the market expectation and better than the previous month. 

The Energy Price Pushes the Inflation 

The energy price pushes the rocketing inflation which doesn’t have the strong footstep. It is because the goods price increase is more caused by the rising seasonal commodity of energy. 

The energy price portion is seen as a sector that doesn’t have too much contribution on the Japanese economy. It is experiencing the consumption decline at the moment. 

It is because the commodity price jump only has an effect to the producer price increase. Basically, the companies are quite careful in rising the price in the customers' level.

So many people believe that the Bank of Japan will maintain its huge stimulus program for this time. It is because the Japan's inflation rate is still far from the target of 2 percent. 

Lockdown and Restriction May Slow Down tThe Economy

It is known that Japan will apply the restriction up to 22 of August 2021. That makes the economy outlook in that country is not too confident. That is why; BoJ then takes a decision. 

They decided to cut the economy growth projection from 4.0% to become 3.8% for a fiscal year that will be ended on March 2022. There is an interesting thing happened in the market. 

In fact, the major inflation increase in Jalan doesn’t have the significant impact for the yen versus US dollar. The USD/JPY pair is now around 109.56 or strengthening by 0.12 percent daily. 

The market participants concern to the coronavirus case increase, especially the Delta variant, is predicted will still support the Yen position as a safe haven currency in the market. 

BOJ Maintains Their Interest Rate

Yesterday morning, BOJ decided to maintain their short – term interest rate to be still in -0.1% level. That was based on the market expectation. They also continue the obligation purchase. 

The obligation yield target from the government is in the 0% level 10Y. However, at the same moment, BOJ declined the Japan’s GDP prediction for the 2021 fiscal year from 4% to become 3.8%.

As a replacement, the central Bank increased the economy growth prediction of the 20222 fiscal year from 2.4% to 2.7%. It comes with an expectation that the public’s consumption increase. 

It is especially after the vaccination program is accelerated really well. BOJ also increases the inflation prediction from 0.1% to 0.6%. There are some reasons why it is still increasing. 

The Commodity and Energy Price Increase is Volatile

The rising inflation happened because of the commodity and energy price increase. However, The analysts believe that they are volatile and not based on the domestic salary growth. 

The Japan’s economy has a possibility to be better in line with the decreasing effect of the pandemic. That happens gradually bceuade of the vaccination progress which is done there. 

However, BOJ stated that outlook is still not stable because the domestic and worldwide economy can be shaken. That is because of the last progress due to the pandemic. 

Market doesn’t welcome the BOJ announcement. The Japan’s GDP projection is forced to be revised as a result of the emergency status extend in some prefectures such as Tokyo, etc.