Core consumer inflation in Japan’s capital beat expectations in April and an index stripping away fuel costs rose at the fastest pace in four decades, highlighting the challenge the new central bank chief faces in keeping ultra-low interest rates.
The data comes hours before the Bank of Japan’s policy meeting that concludes on Friday, where the board is likely to produce new inflation forecasts that could offer clues on how soon the central bank could phase out its massive stimulus.
The core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, for Tokyo rose 3.5 per cent in April from a year earlier, government data showed on Friday, faster than a median market for a 3.2 per cent rise and well above the BOJ’s 2 per cent target. It accelerated from a 3.2 per cent increase in March.
The core-core CPI, which strips away both fresh food and fuel costs, rose 3.8 per cent in April from a year earlier, pacing up from a 3.4 per cent gain in March, the data showed.
The core-core index, which is closely watched by the BOJ in gauging trend inflation, rose at the fastest annual pace since April 1982, when it rose 4.2 per cent.
The rise in the Tokyo’s inflation, which is seen as a leading indicator of nationwide trends, may cast doubt on the BOJ’s view that the recent cost-driven price rises are temporary, some analysts say.
Separate data released on Friday showed Japan’s factory output rose 0.8 per cent in March from the previous month, exceeding market forecasts for a 0.5 per cent gain.
Manufacturers surveyed by the government expect industrial production to rise 4.1 per cent in April and by 2.0 per cent in May, a sign auto output is recovering from disruptions caused by supply constraints.
Japan’s economy is finally recovering from the scars of the COVID-19 pandemic, though risks of a global slowdown and rising food prices hang over the outlook for exports and consumption.
With inflation already exceeding its target, markets are rife with speculation the BOJ could soon phase out ultra-loose monetary policy under new governor Kazuo Ueda.
Markets, however, widely expect the BOJ to keep monetary settings unchanged at Friday’s policy meeting as it awaits more clarity on whether recent wage increases will become durable enough to keep inflation sustainably around its target.
Jobless rate rises to 2.8% in March
apan’s jobless rate rose to 2.8 per cent in March from 2.6 per cent in the previous month, government data showed on Friday.
The seasonally adjusted unemployment rate was higher than economists’ median forecast of 2.5 per cent in a Reuters poll.
The jobs-to-applicants ratio fell to 1.32 from February’s 1.34, labour ministry data showed. – Reuters
