Tokyo inflation eases as energy costs cool ahead of election
Consumer prices excluding fresh food rose 3.1% in the capital in June from a year earlier, according to a Ministry of Internal Affairs and Communications release Friday. The median economist forecast was for a 3.3% gain. Overall inflation also came to 3.1%, slowing from 3.4% in May.
That still keeps price gains well above the Bank of Japan's price goal of 2%, leaving the central bank on track to mull the timing of its next interest rate hike once uncertainties over global trade have cleared.
Electricity prices rose 5.3% year on year, slowing from 10.8% in the previous month, while increases in prices for natural gas and fuel oil also slowed. Gasoline prices fell 1%, reversing from 6.3% gains in the previous month, and prices for water fell 34.6% year on year.
"In today's data, the slowdown in rice price hikes and the drag from energy were pretty significant, and it really feels like policy factors pushed down the overall figure,' said Harumi Taguchi, principal economist at S&P Global Market Intelligence. "Going forward, since import prices have been coming down, the upward pressure isn't as strong as before.'
The slowdown in price growth for Tokyo, which serves as a leading indicator for nationwide data, may offer some relief to Prime Minister Shigeru Ishiba ahead of a July 20 Upper House election. His Liberal Democratic Party experienced its worst election result on record in a Tokyo Metropolitan Assembly vote last weekend as public discontent persists over the elevated pace of inflation.
Price-conscious voters will hit the polls next month after more than three years of inflation at or above the BOJ's 2% target. Ishiba has pledged cash handouts to ease the burden, while opposition parties have called for a first-ever cut to the sales tax.
The prime minister last month resumed subsidies to bring down gasoline prices. The soaring price of rice, which more than doubled in May from a year earlier, has drawn national attention and the government responded with measures including the release of emergency stockpiles. On the heels of those steps, the average weekly rice price has dropped for four straight weeks, according to the agriculture ministry.
In the latest month, rice prices rose 90.6% from a year earlier, easing from a 93.7% gain last month, but food prices excluding fresh food rose 7.2%, the fastest clip since October 2023.
Various government actions are expected to help slow inflation through the summer months.
In other data on Friday, Japan's jobless rate stayed at 2.5% in May, according to a separate release from the internal affairs ministry. The job-to-applicant ratio edged lower to 1.24, meaning there were 124 jobs offered for every 100 applicants, the labor ministry reported.
Retail sales rose 2.2% in May from a year earlier, missing the consensus estimate of 2.5%, while they fell 0.2% versus April.
A brief record of the BOJ's June meeting indicated a widening view among policymakers that inflation is running higher than they expected. The board's most hawkish member, Naoki Tamura, flagged that the central bank may need to hike rates before trade uncertainty clears due to rising inflation risks.
"For the BOJ, whether consumption will firm up alongside prices and wages is important, but we can't rule out the possibility that consumption stays flat or even dips a bit,' Taguchi said. "I don't think this data alone is enough to justify an immediate rate hike.'
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