Whalesbook
Japan's main inflation measure grew at its slowest pace in almost four years, potentially delaying the Bank of Japan's (BOJ) plan to tighten monetary policy. The Ministry of Internal Affairs and Communications reported Friday that the core consumer price index (CPI), which excludes fresh food, rose 1.4% in April from the previous year. This figure was lower than economists' expectations.
Energy Costs and Subsidies Lower Inflation
Inflation excluding both energy and fresh food also slowed to 1.9% annually, below predictions. Price increases for processed foods eased from March, and gains for durable goods slowed. School fees dropped faster, and energy costs decreased at a slower pace than the month before. The government recently decided to restore energy subsidies, which have helped cap rising living costs.
BOJ Faces Difficult Policy Choice
Despite concerns that inflation could spread beyond energy costs, the weak inflation data may disrupt the BOJ's plans for an interest rate hike, possibly as early as next month. Businesses continue to pass on higher labor and material costs, but overall price increases appear to be moderating. The BOJ closely monitors service prices for signs of underlying inflation, which also slowed to 0.9%, adding complexity to the central bank's outlook. Meanwhile, rice prices increased by only 0.6% year-over-year, a significant slowdown from the previous year.