Bleak output, wages, and outlook are halting growth in the country.
Japan's CPI inflation has plateaued at 0.4% YoY in June, according to a DBS Group Research report.
According to the research team, the country's core inflation, excluding fresh food and energy, also remained flat. Tokyo CPI reported 0.1%, indicating a weak outlook for Q3.
Output gap in the country, which has risen to 0.8% of Japan's GDP is Q1, was not enough to create demand-side inflation and leverage to push up core inflation.
"Based on the correlation in recent years, this should push up core inflation only slightly, to about 0.7% at the end of this year," DBS research team said.
DBS reported bleak wage growth as well. As of May, total and base pays tiptoed by 0.7% and 0.9%.
"Given the unemployment rate at a multi-year low of 2.8%, there should be some room for wage growth to pick up further. That said, a wage rise of 1-2% will still be insufficient to take inflation to 1-2%, given the counteracting impact from productivity growth," the research team said.
The Tankan survey for Q2 also showed companies expect prices to rise by 0.8% next year.
A household survey reported that 79.2% of consumers expect prices to go up in the next 12 months, 9.8 points lower than last year's results.
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