Core inflation in Tokyo stays below BOJ target for third month

TOKYO, May 1 : Annual core inflation in Tokyo hit 1.5 per cent in April, data showed on Friday, staying below the central bank’s target for a third straight month as fuel subsidies offset rising raw material costs from the Middle East conflict.

Analysts expect consumer inflation to re-accelerate in the coming months as surging oil prices and higher import prices from a weak yen keep the Bank of Japan (BOJ) under pressure to raise interest rates.

The increase in the Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, followed a 1.7 per cent gain in March and compared with a median market forecast for a 1.8 per cent rise.

An index stripping away the effect of fresh food and fuel, which is closely watched by the BOJ as a better gauge of trend inflation, rose 1.9 per cent in April after a 2.3 per cent gain in March.

The BOJ kept interest rates steady on Tuesday, but dropped strong signals about the chance of a hike as soon as June due to mounting inflationary pressures.

After exiting a decade-long massive stimulus programme in 2024, the BOJ raised rates several times, including in December, when it took its short-term policy rate to 0.75 per cent on the view Japan was on the cusp of durably hitting the central bank’s 2 per cent inflation target.

But the slow pace of rate hikes has been blamed for keeping the yen weak and boosting import costs, which in turn piles inflationary pressure on the economy.

The U.S.-Israeli war with Iran has complicated the BOJ’s rate decision by adding inflationary pressure through rising fuel costs, weighing on an economy heavily reliant on oil imports from the region.