Latest news with #KazuoUeda
Yahoo
3 days ago
- Business
- Yahoo
BOJ's Ueda calls for vigilance over food inflation risks
By Leika Kihara TOKYO (Reuters) -The Bank of Japan must be vigilant to the risk rising food prices could push up underlying inflation that is already near its 2% target, Governor Kazuo Ueda said, signaling the central bank's readiness to continue its rate hikes. The BOJ keeps interest rates low as inflation expectations, or the public's perception on future price moves, stand between 1.5% and 2% - the highest in 30 years though still below its 2% target, Ueda said in a speech at a BOJ-hosted conference. But a renewed rise in food prices, particularly a 90% spike in the price of rice, is pushing up not just headline but underlying inflation, which is typically influenced mostly by improvements in the economy and a tight job market, Ueda said. "Our baseline view is that the effects of food price inflation are expected to wane," he said. "However, given that underlying inflation is closer to 2% than a few years ago, we need to be careful about how food price inflation will impact underlying inflation," he added. The remarks come as the BOJ closely monitors economic risks from higher U.S. tariffs as well as domestic inflationary pressures, in judging how soon to resume interest rate hikes. Although the BOJ downgraded its forecasts due to trade policy uncertainties, it expects underlying inflation to gradually move toward its 2% target over the second half of its forecast horizon running through fiscal 2027, Ueda said. "To the extent that incoming data allows us to gain more confidence in the baseline scenario, as economic activity and prices improve, we will adjust the degree of monetary easing as needed" by raising rates, he said. SUPPLY-SIDE CHALLENGES Japan's core inflation hit 3.5% in April, accelerating at its fastest annual pace in more than two years due largely to a 7% surge in food costs, raising the odds of another rate hike this year. But the central bank has signaled the need to go slow in raising rates to ensure Japan sees inflation durably hit 2% backed by robust domestic demand and steady wage hikes, rather than rising raw material costs. Stubbornly high food prices, blamed largely on rising import costs, have complicated the BOJ's rate decisions by simultaneously hurting consumption and keeping headline inflation well above its target. While central banks typically look through the impact of supply shocks on inflation, that approach was criticised by academics as flawed after U.S. and European central banks were forced to hike rates aggressively after being caught off guard by a spike in inflation caused by Russia's invasion of Ukraine. "I think we have concentrated too much in policy instruments that (work) through the aggregate demand side," Agustin Carstens, General Manager of the Bank for International Settlements (BIS), told the same conference. "Now, we have to work more" in understanding supply-side factors that affect inflation, he added. The BOJ ended a decade-long, massive stimulus programme last year and in January raised short-term interest rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target. While the central bank has signalled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. A Reuters poll, taken on May 7-13, showed most economists expect the BOJ to hold rates steady through September with a small majority forecasting a hike by year-end. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Times
3 days ago
- Business
- Business Times
Tokyo prices rising most in two years, keeps BOJ on hike path
PRICES in Tokyo jumped the most in two years on surging food costs, keeping the Bank of Japan on track for another rate hike in coming months. Consumer prices excluding fresh food rose 3.6 per cent in the capital in May from a year earlier, accelerating from 3.4 per cent in April, the Ministry of Internal Affairs said on Friday. The increase, which outpaced economists' median forecast of a 3.5 per cent gain, was the biggest since January 2023. Overall inflation came to 3.4 per cent, matching a revised 3.4 per cent in April. The readings were partly distorted by policy-related factors, including the fading impact of last year's school fee cuts. While Tokyo's CPI figures serve as a leading indicator for national inflation trends, the high school subsidies were in effect only in the capital. A main driver in the latest figures was prices for foods other than fresh produce, for which gains accelerated to 6.9 per cent from 6.4 per cent in the previous month. Gains in rice prices held roughly steady at 93.7 per cent. Food price hikes 'have pushed down real wages, which is negative for the economy. From a monetary policy perspective, the BOJ likely views it as stronger than on track,' said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Against the backdrop of recent trends, the latest price data will likely keep the BOJ on track for another rate increase in coming months. Figures last week showed that national inflation has stayed at or above the BOJ's 2 per cent target for three years, and Governor Kazuo Ueda said this week that the bank is closer to achieving its target than at any other time in the last three decades. The BOJ warned of potential spillover effects from hot prices for food in its latest Outlook, saying, 'With regard to the recent rise in food prices, such as rice prices, even when price rises themselves mainly result from weather conditions, attention is warranted on the possibility that these rises may induce second-round effects on underlying CPI inflation through changes in household sentiment and inflation expectations.' The BOJ next sets policy at the end of a two-day meeting on June 17, when it's widely expected to leave interest rates unchanged while updating guidance on plans to scale back its government bond purchases. Markets anticipate the bank will continue its gradual quantitative tightening beyond April 2026. The food price gains are a worrisome sign for Prime Minister Shigeru Ishiba ahead of a summer election expected to be held by July. Persistent increases in living costs have fueled public discontent in Japan, weighing heavily on support for Ishiba, whose approval rating has fallen to its lowest level since he took office in October. A majority of surveyed respondents cited economic issues as their top concern. Newly appointed Agriculture Minister Shinjiro Koizumi has pledged to halve the price of the staple grain to around 2,000 yen per 5 kg. To achieve this, the government is in the process of releasing 300,000 tons of stockpiled rice into the market at a fixed wholesale price of about 10,000 yen per 60 kg. Market participants have responded favourably to initial steps on that front. The government has also taken other steps to soothe voters, unveiling a 900 billion yen stimulus package this week that will be funded through existing budget allocations and reserve funds. The package includes the reinstatement of utility subsidies from July through September. Energy prices weighed on the CPI gauge in May, with electricity price growth slowing to 10.8 per cent from 13.1 per cent. Service price growth picked up to 2.2 per cent. The data are in line with the central bank's assessment in its latest Outlook that the economy has recovered moderately with pockets of weakness. A key risk obscuring the economic outlook remains US trade policies. Ishiba and President Donald Trump spoke by phone for the second time in a week on Thursday as Japan's premier pressed his case for exemptions from tariffs. Japan currently faces a 25 per cent tariff on cars, steel, and aluminum, alongside a 10 per cent levy on all other goods that's set to rise to 24 per cent in early July barring a trade agreement. Japan's chief trade negotiator Ryosei Akazawa will meet with his US counterparts in Washington later Friday. Questions over the tariffs could deter the BOJ from hiking rates in the near term, according to Maruyama. 'Just because inflation is on track doesn't automatically mean the bank can raise interest rates — it still needs to assess tariff impacts,' he said. 'Prices being on track is definitely a necessary condition, but I don't think it's enough on its own to determine the timing of a decision.' Reflecting early signs of business anxiety, Japan's industrial production fell 0.9 per cent in April from the previous month, according to the Industry Ministry. Economists had estimated a 1.4 per cent decline. Manufacturers expect a 9 per cent gain in output this month. In other data on Friday, the jobless rate stood at 2.5 per cent in April, the same as in the previous month, according to the Ministry of Internal Affairs. The job-to-applicant ratio held at 1.26, meaning there were 126 jobs available for every 100 job seekers, the Labor Ministry reported separately. Continued labour-market tightness is expected to keep upward pressure on wages as firms compete to hire and retain workers. That could help sustain a virtuous cycle of wage and price growth — a central aim of both the government and the BOJ as they pursue their respective policy strategies. Household sentiment remains fragile amid inflation and economic uncertainty. A separate report from the Industry Ministry showed that retail sales rose 0.5 per cent in April from the previous month. BLOOMBERG
Japan Times
3 days ago
- Business
- Japan Times
Tokyo prices rising most in two years keeps BOJ on hike path
Prices in Tokyo jumped the most in two years on surging food costs, keeping the Bank of Japan (BOJ) on track for another rate hike in the coming months. Consumer prices excluding fresh food rose 3.6% in the capital in May from a year earlier, accelerating from 3.4% in April, the internal affairs ministry said Friday. The increase, which outpaced economists' median forecast of a 3.5% gain, was the biggest since January 2023. Overall inflation came to 3.4%, matching a revised 3.4% in April. The readings were partly distorted by policy-related factors, including the fading impact of last year's school fee cuts. While Tokyo's consumer price index (CPI) figures serve as a leading indicator for national inflation trends, the high school subsidies were in effect only in the capital. A main driver in the latest figures was prices for foods other than fresh produce, for which gains accelerated to 6.9% from 6.4% in the previous month. Gains in rice prices held roughly steady at 93.7%. Food price hikes "have pushed down real wages, which is negative for the economy. From a monetary policy perspective, the BOJ likely views it as stronger than on track,' said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. Against the backdrop of recent trends, the latest price data will likely keep the BOJ on track for another rate increase in coming months. Figures last week showed that national inflation has stayed at or above the BOJ's 2% target for three years, and Gov. Kazuo Ueda said this week that the bank is closer to achieving its target than at any other time in the last three decades. The BOJ warned of potential spillover effects from hot prices for food in its latest outlook, saying, "With regard to the recent rise in food prices, such as rice prices, even when price rises themselves mainly result from weather conditions, attention is warranted on the possibility that these rises may induce second-round effects on underlying CPI inflation through changes in household sentiment and inflation expectations.' The BOJ next sets policy at the end of a two-day meeting on June 17, when it is widely expected to leave interest rates unchanged while updating guidance on plans to scale back its government bond purchases. Markets anticipate the bank will continue its gradual quantitative tightening beyond April 2026. The food price gains are a worrisome sign for Prime Minister Shigeru Ishiba ahead of a summer election expected to be held by July. Persistent increases in living costs have fueled public discontent in Japan, weighing heavily on support for Ishiba, whose approval rating has fallen to its lowest level since he took office in October. A majority of surveyed respondents cited economic issues as their top concern. Newly appointed agriculture minister Shinjiro Koizumi has pledged to halve the price of the staple grain to around ¥2,000 ($14) per 5 kilograms. To achieve this, the government is in the process of releasing 300,000 metric tons of stockpiled rice into the market at a fixed wholesale price of about ¥10,000 per 60 kg. Market participants have responded favorably to initial steps on that front. The government has also taken other steps to soothe voters, unveiling a ¥900 billion stimulus package this week that will be funded through existing budget allocations and reserve funds. The package includes the reinstatement of utility subsidies from July through September. Energy prices weighed on the CPI gauge in May, with electricity price growth slowing to 10.8% from 13.1%. Service price growth picked up to 2.2%. The data are in line with the central bank's assessment in its latest outlook that the economy has recovered moderately with pockets of weakness. A key risk obscuring the economic outlook remains U.S. trade policies. Ishiba and U.S. President Donald Trump spoke by phone for the second time in a week Thursday as Japan's premier pressed his case for exemptions from tariffs. Japan currently faces a 25% tariff on cars, steel and aluminum, alongside a 10% levy on all other goods that is set to rise to 24% in early July barring a trade agreement. Japan's chief trade negotiator Ryosei Akazawa will meet with his U.S. counterparts in Washington later Friday. Questions over the tariffs could deter the BOJ from hiking rates in the near term, according to Maruyama. "Just because inflation is on track doesn't automatically mean the bank can raise interest rates — it still needs to assess tariff impacts,' he said. "Prices being on track is definitely a necessary condition, but I don't think it's enough on its own to determine the timing of a decision.' Reflecting early signs of business anxiety, Japan's industrial production fell 0.9% in April from the previous month, according to the industry ministry. Economists had estimated a 1.4% decline. Manufacturers expect a 9% gain in output this month. In other data Friday, the jobless rate stood at 2.5% in April, the same as in the previous month, according to the internal affairs ministry. The job-to-applicant ratio held at 1.26, meaning there were 126 jobs available for every 100 job seekers, the labor ministry reported separately. Continued labor-market tightness is expected to keep upward pressure on wages as firms compete to hire and retain workers. That could help sustain a virtuous cycle of wage and price growth — a central aim of both the government and the BOJ as they pursue their respective policy strategies. Household sentiment remains fragile amid inflation and economic uncertainty. A separate report from the industry ministry showed that retail sales rose 0.5% in April from the previous month.
Yomiuri Shimbun
3 days ago
- Business
- Yomiuri Shimbun
Core Inflation in Japan Capital Hits 3.6％, Keeps BOJ Rate-Hike Chance Alive
Yomiuri Shimbun file photo The Bank of Japan TOKYO (Reuters) — Core inflation in Japan's capital hit 3.6% in the year to May, data showed on Friday, marking a more than two-year high in a sign persistent rises in food costs will keep the central bank under pressure to hike interest rates further. Factory activity is stalling with separate data showing industrial output fell in April, highlighting the dilemma the Bank of Japan faces in balancing mounting inflationary pressures and the hit to the economy from steep U.S. tariffs. The increase in the Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, exceeded a median market forecast for a 3.5% gain and followed a 3.4% rise in April. It was the fastest annual pace of increase since January 2023, when it hit 4.3%. Core inflation in Tokyo, seen as a leading indicator of nationwide price trends, thus exceeded the BOJ's 2% target for three straight years. A separate index that strips away the effects of both fresh food and fuel costs, closely watched by the BOJ as a broader price trend indicator, rose 3.3% in May from a year earlier after a 3.1% rise in March. Part of the rise was due to the base effect of last year's sharp drop caused by the launch of school education subsidies and the phase-out of nationwide subsidies to curb utility bills. But the data showed signs of sticky food inflation with non-fresh food prices up 6.9% in May from a year earlier. The price of rice soared 93.2% year-on-year. Services inflation accelerated to 2.2% in May from 2.0% in April, suggesting companies were gradually passing on rising labor costs. Separate data released on Friday showed Japan's factory output fell in April by 0.9% from the previous month. Manufacturers surveyed by the government expect output to increase 9.0% in May and drop 3.4% in June, the data showed. While uncertainty over U.S. tariffs will likely keep the BOJ on a holding pattern, the price pressure may not allow the bank to pause on rate hikes for too long, some analysts say. BOJ Governor Kazuo Ueda said on Tuesday the central bank must be vigilant to the risk rising food prices could push up underlying inflation that is already near its 2% target. The BOJ ended a decade-long, massive stimulus program last year and in January raised short-term interest rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target. While the central bank has signaled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase.
Reuters
3 days ago
- Business
- Reuters
Core inflation in Japan capital hits 3.6%, keeps BOJ rate-hike chance alive
TOKYO, May 30 (Reuters) - Core inflation in Japan's capital hit 3.6% in the year to May, data showed on Friday, marking a more than two-year high in a sign persistent rises in food costs will keep the central bank under pressure to hike interest rates further. The data highlights the dilemma the Bank of Japan (BOJ) faces in balancing mounting inflationary pressures and the hit to Japan's economy from steep U.S. tariffs. The increase in the Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, exceeded a median market forecast for a 3.5% gain and followed a 3.4% rise in April. It was the fastest annual pace of increase since January 2023, when it hit 4.3%. A separate index that strips away the effects of both fresh food and fuel costs, closely watched by the BOJ as a broader price trend indicator, rose 3.3% in May from a year earlier after a 3.1% rise in March. Part of the rise was due to the base effect of last year's sharp drop caused by the launch of school education subsidies and the phase-out of nationwide subsidies to curb utility bills. But the data showed signs of sticky food inflation with non-fresh food prices up 6.9% in May from a year earlier. The price of rice soared 93.2% from year-before levels. While uncertainty over U.S. tariffs will likely keep the BOJ on a holding pattern, the price pressure may not allow the bank to pause on rate hikes for too long, some analysts say. BOJ Governor Kazuo Ueda said on Tuesday the central bank must be vigilant to the risk rising food prices could push up underlying inflation that is already near its 2% target. The BOJ ended a decade-long, massive stimulus programme last year and in January raised short-term interest rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target. While the central bank has signalled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. A Reuters poll, taken on May 7-13, showed most economists expect the BOJ to hold rates steady through September with a small majority forecasting a hike by year-end.
