Tokyo inflation regains momentum ahead of BOJ Ueda’s first meet
INFLATION in Tokyo unexpectedly accelerated again, suggesting stronger than forecast underlying price strength as the Bank of Japan (BOJ) prepares to release its latest inflation projections at governor Kazuo Ueda’s first monetary policy meeting.
Consumer prices excluding fresh food rose 3.5 per cent in the capital in April, picking up speed from the previous month’s 3.2 per cent pace as processed food prices continued to strengthen, according to the ministry of internal affairs on Friday (Apr 28). Economists had expected the reading to match its pace in March, after two months of slowing down.
Inflation in Tokyo is a leading indicator of the nationwide trend.
Friday’s result shows that inflation remains hot, even after the government’s stimulus measures curbed utility prices. The key metric has been above the Bank of Japan’s price target of 2 per cent for 11 months in Tokyo, while inflation excluding fresh food and energy has also continued to gain pace, stoking concerns that the bank may be underestimating the strength of underlying price increases.
Ueda, who is set to conclude his first two-day policy meeting shortly, said in parliament on Monday that inflation is expected to cool to below 2 per cent later this fiscal year.
BOJ watchers widely expect the academic-turned-BOJ-chief won’t make a big splash at his first meeting, leaving interest rates and asset purchase setting unchanged. Ueda himself has recently said that it’s appropriate to continue with monetary easing including the yield curve control programme, considering current economic and inflationary conditions.
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The BOJ’s price outlook for the upcoming years is a key focus for market watchers. Of particular interest is the central bank’s consumer price index forecast for the fiscal year 2025, which is set to be released for the first time.
Separate data showed the labour market conditions continued to weaken in March, with the jobless rate increasing to 2.8 per cent after an unexpected rise in the previous month. The jobs-to-applicant ratio also edged down to 1.32, meaning there were 132 jobs offered for every 100 applicants, in a sign that wages may struggle to further strengthen.
While energy prices have been held down by Prime Minister Fumio Kishida’s stimulus package, other daily necessities continue to rise in costs. Prices excluding the impact from energy and fresh food hit 3.8 per cent in April, the highest since 1982.
Other data showed that Japan’s industrial production gained for the second straight month in March, rising 0.8 per cent from a month earlier. The result may help lift the country’s gross domestic product for the first quarter.
Another report showed retail sales increased 0.6 per cent in March from a month earlier, marking four consecutive months of growth. The resilient spending has been partly driven by recovering inbound demand. The number of foreign tourists surged to about 1.8 million in March, almost 30 times higher than last year’s figure, amid the cherry blossom season and the resumption of cruise ship operations. BLOOMBERG
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