Consumer prices excluding fresh products increased by 2.2% in April compared to last year, the Interior Ministry announced on Friday. This figure matches analyst estimates. The indicator remained at or above the BOJ’s 2% target for the 25th month. Price increases for processed food products slowed to 3.5%, partly due to base effects after prices jumped a year earlier, a sign that companies were increasingly willing to pass on higher prices. costs on consumers.
A more in-depth measure of inflation, which excludes fresh food and energy prices, came back at 2.4%, also in line with the consensus estimate.
The results alone are unlikely to stop the BoJ from seeking opportunities to further reverse its accommodative policy settings. BOJ watchers are increasingly warning of the risk of an early rate hike as the yen remains near a 34-year low, even after the government was suspected of intervening in the market to support the currency twice.
Service prices, which the BOJ has highlighted as a key factor in its policy deliberations, rose 1.7% year-on-year, decelerating from 2.1% the previous month. Economists are paying more attention to this month’s data because April marks the start of the fiscal year, when many companies implement price changes for their products and services.
Inflation in Tokyo, a leading indicator of national figures, recorded a surprise fall in April after the local government began subsidizing education. Analysts, including those at the NLI Research Institute, estimated that the impact of these measures was much smaller for the national indicator, reducing price increases by about 0.1 percentage points or less.
Japanese companies are increasingly facing questions about whether to raise prices to pass on higher costs from the weak yen, even if consumer spending remains lackluster. Household spending has been falling for 13 months, with the persistent fall in real wages weakening buyers’ propensity to spend.
Japan’s economy contracted in the first quarter of this year, bringing to three quarters of zero or negative growth, according to a government report released this month. A key missing piece of the economic puzzle is personal spending, which fell for a fourth straight quarter.
The economy’s poor start to the year will not prevent the central bank from committing to another interest rate hike as a rebound in growth is expected, BOJ Governor Kazuo said on Thursday Ueda. “There is no change in the overall situation so far” when it comes to recovery, Ueda told reporters in Italy ahead of a meeting of G7 financial authorities in Stresa.
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