The Bank of Japan's (BOJ) efforts to reach its 2 percent inflation target didn't get much of a boost from the latest data, with the country's core consumer price index for June barely budged and as households unexpectedly snapped their wallets shut.
Japan's core consumer price index (CPI), which excludes fresh food, rose 0.1 percent on-year in June, a tad above the 0.0 percent forecast in a Reuters poll. The "core-core" CPI, which excludes both food and energy prices, rose 0.6 percent from a year earlier.
But household spending unexpectedly fell 2.0 percent on-year in June, sharply underperforming expectations for a 1.7 percent rise from a Reuters poll. That follows May's 4.8 percent increase, which was the the first on-year increase in the data since the country increased its consumption tax last year.
"Today's data provide some tentative signs that underlying price pressure has started to strengthen again. But with consumer spending falling to the lowest level since last year's sales tax hike, we see little chances that the 2 percent inflation target will be hit by next summer," Marcel Thieliant, a Japan economist at Capital Economics, said in a note Friday.
"The Bank is pinning its hopes on a strong rebound in demand, which would create capacity shortages and stoke price pressures. Unfortunately, today's data on consumer spending underline that these hopes are unlikely to materialize," he said.
The seasonally adjusted jobless rate rose to 3.4 percent in June, slightly above the 3.3 percent forecast in a Reuters poll.
The Japanese yen strengthened after the data, with the U.S. dollar fetching 123.97 after the stock market opened, from 124.15 prior to the data release. The Nikkei 225 index was down 0.3 percent in early trade.