Consumer Inflation in Japan’s Capital City Off 42-year Peak
![](https://japannews.yomiuri.co.jp/wp-content/uploads/2023/02/tokyo.jpg)
The cityscape of Tokyo
10:36 JST, March 3, 2023
TOKYO (Reuters) – Core consumer inflation in Japan’s capital Tokyo slowed in February as the effect of government energy subsidies kicked in, though an index stripping away the effect of fuel hit a fresh three-decade high in a sign of broadening inflationary pressure.
Separate data showed Japan’s jobless rate hit a three-year low of 2.4% in January, suggesting intensifying labor shortages will prod companies to raise wages and help ease the pain households are feeling from rising costs of living.
The readouts cast doubt on the Bank of Japan’s view the recent cost-driven inflation will prove temporary, and will likely keep the central bank under pressure to phase out its massive monetary stimulus, analysts say.
“Inflation in the capital has fallen less than we expected last month, which suggests some upside risks to our forecast for inflation to fall below the Bank of Japan’s 2% target by mid-year,” said Darren Tay, Japan economist at Capital Economics.
Core consumer prices in Tokyo, a leading indicator of nationwide trends, rose 3.3% in February from a year earlier, matching market forecasts and slowing from a nearly 42-year high of 4.3% hit in January, government data showed on Friday.
The Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel costs, exceeded the BOJ’s 2% target for nine straight months.
The slowdown was mostly due to the effect of government energy subsidies to curb soaring utility bills, the data showed.
A separate index for Tokyo stripping away both fresh food and energy prices, which is closely watched by the BOJ as a gauge of price pressures driven by domestic demand, was 3.2% higher in February than a year earlier, picking up from January’s 3.0% rise.
It marked the fastest year-on-year pace of increase since August 1991, when the index also rose 3.2%.
Energy costs rose 5.3% in February from a year earlier, much slower than a 26.0% spike in January. But ex-fresh food prices were up 7.8% in February, faster than a 7.4% rise in January.
Service inflation, which the BOJ sees as key to achieving sustained wage growth, perked up to 1.3% in February from 1.2% in January, the data showed.
Nationwide core consumer prices rose 4.2% in January from a year earlier, hitting a fresh 41-year high, as an increasing number of companies passed on higher costs to households.
With inflation exceeding its 2% target, the BOJ has seen its yield curve control (YCC) come under attack from investors betting it will soon have to change policy and allow a near-term interest rate hike.
Markets are rife with speculation the central bank will phase out or abandon YCC under incoming BOJ Governor Kazuo Ueda, who succeeds incumbent Haruhiko Kuroda in April.
BOJ policymakers have repeatedly stressed the need to maintain ultra-loose policy until inflation is seen sustainably hitting their 2% target accompanied by higher wage growth.
Under YCC, the BOJ guides short-term interest rates at -0.1% and the 10-year bond yield around 0% with an implicit ceiling set at 0.5%.
"News Services" POPULAR ARTICLE
JN ACCESS RANKING