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Yahoo
30-05-2025
- Business
- Yahoo
Core inflation in Japan capital hits 2-year high, keeps rate hike chance alive
By Leika Kihara TOKYO (Reuters) -Core inflation in Japan's capital hit a more than two-year high on persistent rises in food costs, data showed on Friday, keeping the central bank under pressure to hike interest rates further. But factory output slid in April in a sign manufacturers are feeling the pinch from slowing global demand, highlighting the dilemma the Bank of Japan faces in balancing inflationary pressures and the hit to the economy from steep U.S. tariffs. The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.6% in May from a year earlier, exceeding market forecasts for a 3.5% gain and perking up from 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. "The Tokyo CPI showed a further broad-based acceleration in inflation, which suggests that the BOJ may hike even earlier than our current forecast of October," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. 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. MORE PRICE HIKES COMING Sticky food inflation remained the main driver of the rise with non-fresh food prices up 6.9% in May from a year earlier and the cost of rice soaring 93.2%. But services inflation also accelerated to 2.2% in May from 2.0% in April, suggesting companies were gradually passing on rising labour costs. "The fact services prices rose is positive for the BOJ, which wants to keep alive expectations of further rate hikes," said Masato Koike, senior economist at Sompo Institute Plus. "But U.S. policy uncertainty will make it hard to keep the BOJ from hiking too soon. By the time the dust settles, price developments could have changed in a way that makes rate hikes difficult," he added. Many analysts expect consumer inflation to slow in coming months as falling crude oil prices and the drop in import costs from the yen's rebound. The hit to exports from U.S. tariffs and slowing global demand could also hurt Japanese manufacturers' profits and discourage them from raising wages next year. 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. But food inflation may not allow the BOJ to pause on rate hikes for too long. Japanese firms plan to hike prices for 1,932 food and beverages in June, triple the number from a year ago, a survey by private think tank Teikoku Databank showed on Friday. BOJ Governor Kazuo Ueda told parliament on Friday the central bank was mindful that companies continued to actively hike wages and raise prices to pass on higher costs. "Japan may face a tricky situation where public attention to rising food prices heighten inflation expectations, which have so far been stable," said Tsutomu Watanabe, an academic at the University of Tokyo's graduate school of economics. The BOJ ended a massive stimulus programme last year and in January raised short-term 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. Sign in to access your portfolio
CNA
30-05-2025
- Business
- CNA
Core inflation in Japan capital hits 2-year high, keeps rate hike chance alive
TOKYO :Core inflation in Japan's capital hit a more than two-year high on persistent rises in food costs, data showed on Friday, keeping the central bank under pressure to hike interest rates further. But factory output slid in April in a sign manufacturers are feeling the pinch from slowing global demand, highlighting the dilemma the Bank of Japan faces in balancing inflationary pressures and the hit to the economy from steep U.S. tariffs. The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.6 per cent in May from a year earlier, exceeding market forecasts for a 3.5 per cent gain and perking up from a 3.4 per cent rise in April. It was the fastest annual pace of increase since January 2023, when it hit 4.3 per cent. Core inflation in Tokyo, seen as a leading indicator of nationwide price trends, thus exceeded the BOJ's 2 per cent 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 per cent in May from a year earlier after a 3.1 per cent rise in March. "The Tokyo CPI showed a further broad-based acceleration in inflation, which suggests that the BOJ may hike even earlier than our current forecast of October," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. 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. MORE PRICE HIKES COMING Sticky food inflation remained the main driver of the rise with non-fresh food prices up 6.9 per cent in May from a year earlier and the cost of rice soaring 93.2 per cent. But services inflation also accelerated to 2.2 per cent in May from 2.0 per cent in April, suggesting companies were gradually passing on rising labour costs. "The fact services prices rose is positive for the BOJ, which wants to keep alive expectations of further rate hikes," said Masato Koike, senior economist at Sompo Institute Plus. "But U.S. policy uncertainty will make it hard to keep the BOJ from hiking too soon. By the time the dust settles, price developments could have changed in a way that makes rate hikes difficult," he added. Many analysts expect consumer inflation to slow in coming months as falling crude oil prices and the drop in import costs from the yen's rebound. The hit to exports from U.S. tariffs and slowing global demand could also hurt Japanese manufacturers' profits and discourage them from raising wages next year. Separate data released on Friday showed Japan's factory output fell in April by 0.9 per cent from the previous month. Manufacturers surveyed by the government expect output to increase 9.0 per cent in May and drop 3.4 per cent in June, the data showed. But food inflation may not allow the BOJ to pause on rate hikes for too long. Japanese firms plan to hike prices for 1,932 food and beverages in June, triple the number from a year ago, a survey by private think tank Teikoku Databank showed on Friday. BOJ Governor Kazuo Ueda told parliament on Friday the central bank was mindful that companies continued to actively hike wages and raise prices to pass on higher costs. "Japan may face a tricky situation where public attention to rising food prices heighten inflation expectations, which have so far been stable," said Tsutomu Watanabe, an academic at the University of Tokyo's graduate school of economics. The BOJ ended a massive stimulus programme last year and in January raised short-term rates to 0.5 per cent on the view Japan was on the cusp of durably meeting its 2 per cent 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.
RTÉ News
23-05-2025
- Business
- RTÉ News
Japan's core inflation hits more than two-year high
Japan's core inflation accelerated at its fastest annual pace in more than two years in April on steady rises in food costs, data showed today, raising the odds of another interest rate hike by the end of the year. The data underscores the Bank of Japan's predicament of balancing price pressures from persistent food inflation against growth headwinds from US President Donald Trump's tariffs. The core consumer price index (CPI), which excludes fresh food but includes oil prices, rose 3.5% in April from a year earlier, exceeding market forecasts for a 3.4% gain and accelerating from a 3.2% increase in March. It was also the fastest annual pace of growth for the index since the 4.2% rise in January 2023, holding above the central bank's 2% target for more than three years. "Underlying inflation remained strong in April despite the slashing of public high school fees," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. "Our own view is that the persistent strength in inflation will convince the Bank of Japan to hike interest rates yet again in October," he said. A Reuters poll, taken on May 7-13, showed most economists expect the Bank of Japan to hold rates steady up to September with a small majority forecasting a hike by year-end. The latest uptick in inflation was driven mostly by a food price surge of 7% in a sign many companies hiked prices at the April start of Japan's new fiscal year. The price of rice spiked 98.6% last month from a year earlier, while that of chocolate jumped 31%. Another index stripping away both fuel and fresh food, which is scrutinised by the Bank of Japan as a better gauge of demand-driven price pressure, rose 3% in April from a year earlier, the data showed. It accelerated from a 2.9% gain in March. The Bank of Japan 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 Trump's tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. Governor Kazuo Ueda has said the timing for underlying inflation to converge towards the Bank of Japan's target has been pushed back somewhat due to "extremely high" economic uncertainty. While the data highlighted sticky price pressure, some analysts expect inflation to slow back near the Bank of Japan's target by year-end as the yen's rally push down import costs. The hit to growth from US tariffs may also intensify later this year and discourage firms from hiking pay, casting doubt on whether Japan can achieve a wage-driven rise in prices - a key prerequisite for further rate hikes, analysts say. Service-sector inflation moderated to 1.3% in April from 1.4% in March, a sign companies were slow in passing on rising labour costs, the CPI data showed. Consumption remains stagnant as wage growth fails to catch up with inflation, a key factor that drove Japan's economy into contraction in the first quarter. "Shunto wage negotiations delivered a solid pickup in 2025, but with inflation cooling more slowly than hoped, those gains won't go as far as they could," said Stefan Angrick, an analyst at Moody's Analytics, adding that U.S. tariffs will hurt growth. "The Bank of Japan isn't done hiking, but it's not moving just yet. Tariff haze will keep the central bank on hold for the time being. We expect another rate hike in early 2026," he said.
New Straits Times
23-05-2025
- Business
- New Straits Times
Japan's core inflation hits more than 2-year high, could force year-end BOJ hike
TOKYO: Japan's core inflation accelerated at its fastest annual pace in more than two years in April on steady rises in food costs, data showed on Friday, raising the odds of another interest rate hike by year-end. The data underscores the Bank of Japan's predicament of balancing price pressures from persistent food inflation against growth headwinds from US President Donald Trump's tariffs. The core consumer price index (CPI), which excludes fresh food but includes oil prices, rose 3.5 per cent in April from a year earlier, exceeding market forecasts for a 3.4 per cent gain and accelerating from a 3.2 per cent increase in March. It was also the fastest annual pace of growth for the index since the 4.2 per cent rise in January 2023, holding above the central bank's 2 per cent target for more than three years. "Underlying inflation remained strong in April despite the slashing of public high school fees," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. "Our own view is that the persistent strength in inflation will convince the (BOJ) to hike interest rates yet again in October," he said. 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. The latest uptick in inflation was driven mostly by a food price surge of 7.0 per cent in a sign many companies hiked prices at the April start of Japan's new fiscal year. The price of rice spiked 98.6 per cent last month from a year earlier, while that of chocolate jumped 31 per cent. Another index stripping away both fuel and fresh food, which is scrutinised by the BOJ as a better gauge of demand-driven price pressure, rose 3.0 per cent in April from a year earlier, the data showed. It accelerated from a 2.9 per cent gain in March. The BOJ ended a decade-long, massive stimulus programme last year and in January raised short-term interest rates to 0.5 per cent on the view Japan was on the cusp of durably meeting its 2 per cent inflation target. While the central bank has signalled readiness to raise rates further, the economic repercussions from Trump's tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. Governor Kazuo Ueda has said the timing for underlying inflation to converge towards the BOJ's target has been pushed back somewhat due to "extremely high" economic uncertainty. WAGE RISKS While the data highlighted sticky price pressure, some analysts expect inflation to slow back near the BOJ's target by year-end as the yen's rally push down import costs. The hit to growth from US tariffs may also intensify later this year and discourage firms from hiking pay, casting doubt on whether Japan can achieve a wage-driven rise in prices - a key prerequisite for further rate hikes, analysts say. Service-sector inflation moderated to 1.3 per cent in April from 1.4 per cent in March, a sign companies were slow in passing on rising labour costs, the CPI data showed. Consumption remains stagnant as wage growth fails to catch up with inflation, a key factor that drove Japan's economy into contraction in the first quarter. "Shunto wage negotiations delivered a solid pickup in 2025, but with inflation cooling more slowly than hoped, those gains won't go as far as they could," said Stefan Angrick, an analyst at Moody's Analytics, adding that US tariffs will hurt growth. "The Bank of Japan isn't done hiking, but it's not moving just yet. Tariff haze will keep the central bank on hold for the time being. We expect another rate hike in early 2026," he said.
Economic Times
23-05-2025
- Business
- Economic Times
Japan's core inflation hits more than 2-year high, could force year-end BOJ hike
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Japan's core inflation accelerated at its fastest annual pace in more than two years in April, data showed on Friday, raising the odds of another interest rate hike by data underscores the Bank of Japan's predicament of balancing price pressures from persistent food inflation against growth headwinds from U.S. President Donald Trump's core consumer price index (CPI), which excludes fresh food but includes oil prices, rose 3.5% in April from a year earlier, exceeding market forecasts for a 3.4% gain and accelerating from a 3.2% increase in was also the fastest annual pace of growth for the index since the 4.2% rise in January 2023, holding above the central bank's 2% target for more than three years."Underlying inflation remained strong in April despite the slashing of public high school fees," said Marcel Thieliant , head of Asia-Pacific at Capital Economics."Our own view is that the persistent strength in inflation will convince the (BOJ) to hike interest rates yet again in October," contrary to the dominant market view that U.S. trade tensions will force it to hold fire this year, Thieliant said.A Reuters poll of economists showed that the BOJ will hold rates steady through September, with a small majority forecasting a 25-basis point rate hike by index stripping away both fuel and fresh food, which is scrutinised by the BOJ as a better gauge of demand-driven price pressure, rose 3.0% in April from a year earlier, the data showed. It accelerated from a 2.9% gain in inflation accelerated to 7.0% in April from 6.2% in March in a sign many companies hiked prices at the April start of Japan's new fiscal year. The price of rice spiked 98.6% last month from a year earlier, while that of chocolate jumped 31%. Service-sector inflation was more moderate at 1.3% in April, compared with 1.4% in March, suggesting companies were slow in passing on rising labour costs, the data 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 the central bank has signalled readiness to raise rates further, the economic repercussions from Trump's tariffs have complicated decisions around the timing of the next rate increase.
