Japan’s April Inflation Slows Further to 2.2％, Matches Forecast

Reuters

10:04 JST, May 24, 2024

TOKYO (Reuters) — Japan’s core inflation slowed for a second straight month in April due to milder food inflation while staying comfortably above the central bank’s 2% target, government data showed on Friday.

The nationwide core consumer price index (CPI), which excludes fresh food items, rose 2.2% from a year earlier after rising 2.6% in March. It matched the median market forecast.

The “core core” index, which excludes both fresh food and energy costs and is closely watched by the Bank of Japan as a key gauge of broader inflation trends, rose 2.4% after increasing 2.9% in March.

Inflation data is seen as key to further decisions on rate hikes by the Bank of Japan (BOJ), which wants to push interest rates higher albeit gradually after ending negative rates in March in a landmark shift away from its decade-long super-easy monetary policy.

The BOJ has said a virtuous cycle of sustained, stable achievement of its 2% price target and strong wage growth is crucial for normalizing policy.

Mounting bets for further BOJ policy tightening this year sent Japan’s 10-year government bond yield to 1% briefly this week, a level unseen since May 2013, in the very early days of former BOJ Governor Haruhiko Kuroda’s unprecedented policy-easing experiment.

The speculation has been driven partly by the yen’s persistent weakness, which markets say could force the BOJ to move forward the next interest rate hike to soften its impact on the cost of living.

A weakening yen, while pushing up import prices, threatens to further exacerbate households’ purchasing power and weigh on consumption.