Japan’s inflation re-accelerated last month after cooling earlier in the year, likely supporting views that the central bank might have to revise its price outlook, bringing the Bank of Japan (BOJ) a step closer to policy normalization.
Consumer prices excluding fresh food rose 3.4 percent from a year ago, quickening from the previous month, driven by gains in processed food and hotel prices, the Japanese Ministry of Internal Affairs and Communications reported yesterday.
The result came in line with analysts’ forecasts.
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The national data were consistent with the results of the leading Tokyo figures, which showed renewed upward momentum after two months of deceleration.
The acceleration in the key inflation gauge is likely to cement the view of many BOJ watchers that the central bank would bump up its price forecasts, leading to speculation over policy adjustment as early as July.
“These are very strong figures,” Dai-Ichi Life Research Institute senior executive economist Yoshiki Shinke said.
Underlying inflation “continues to accelerate, reflecting businesses passing their costs onto consumers. There is no doubt that the BOJ will raise its inflation outlook for this fiscal year in July,” he said.
In the latest quarterly outlook report, the BOJ projected core prices rising at just 1.6 percent in fiscal 2025, implying that the bank’s 2 percent sustainable inflation goal would not be achieved within its forecast period.
At the same time, new BOJ Governor Kazuo Ueda has indicated that once the inflation target comes into sight, he would adjust existing policy, including the yield curve control program.
Processed foods continued to drive overall inflation, boosting it by 2 percentage points. Food prices rose 9 percent compared with the previous year, the biggest jump since 1976. Service costs increased 1.7 percent, the biggest gain since 1995 excluding the impact of sales tax hikes.
Prices excluding the impact from energy and fresh food, a measure of the deeper inflation trend, also quickened to the fastest pace since 1981.
Food price hikes also do not seem to be ending anytime soon. The prices of about 5,600 food items are expected to rise from next month, a Teikoku Databank report said.
“Food price increases will continue at least until this fall,” the data firm said.
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