While core inflation read lower from the prior month, a reading that showed inflation excluding food and fuel costs surged to a 42-year high in May, indicating that underlying Japanese inflation remained high.
The trend points to mounting pressure on the Bank of Japan to tighten policy, even as the bank reiterated that it has no plans to alter its ultra-loose policy in the near future. High inflation could also potentially offset recent resilience seen in the Japanese economy, which had in part attracted a heavy dose of foreign buying into local stocks.
Investors used the high inflation reading as a catalyst to lock-in recent gains in the Japanese market. Both the Nikkei and the TOPIX had surged to 33-year highs earlier in the week.
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