According to Japanese government data, core consumer prices in Japan have shot up by 1.9% in April compared from a year earlier. Core consumer prices are a leading indicator of Japanese price trends.
The increase in core consumer prices, fuelled by Western sanctions against Russia and the COVID-19 pandemic, underscores a common view among economists that Japan will see an acceleration in price rises to the central bank’s 2% target in coming months.
“The nationwide (core) inflation may rise above 2% in April-June…as the picture has been the same in recent months – food price hikes have been widening,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. “Meanwhile, it may not keep accelerating further as the pace of the energy price inflation is slowing.”
Incidentally, the rise in Japan’s core consumer price index (CPI) is faster than the median market forecast for a 1.8% gain and follows a 0.8% increase for March. The index excludes fresh food, which is a volatile factor, but includes energy items.
That marked the fastest gain since March 2015, when the index rose 2.2%.
In the overall reading, which includes fresh food costs, Tokyo CPI increased 2.5% in April from a year before, the fastest growth since October 2014.
According to the data, the fading effect of cellphone fee cuts last year pushed up the overall CPI by 0.80 points, while non-fresh food prices drove it up by 0.17 points.
To-go sushi packages, hamburgers and breads saw the biggest price hikes among food items in April.
In April, energy prices in Japan rose 24.6% year-on-year, slower than in March, thanks to the government’s fuel subsidy programs aimed at lowering gasoline and other energy costs.
Last week, the Bank of Japan (BOJ) raised its forecast for this year’s inflation rate but kept its ultra-loose monetary policy unchanged, stressing its resolve to maintain massive stimulus until inflationary pressures were accompanied by wage rises and stronger demand.
“By looking at the core-core CPI, Japan’s price inflation stands at a fairly high level compared to its past trends, so in theory the BOJ should naturally shift its monetary policy to the direction of tightening,” said Takahide Kiuchi, executive economist at Nomura Research Institute. “There is an increasing risk of a downward (economic) spiral to kick off, where consumption is dragged down by a weak yen and rising prices, which decrease workers’ real wages.”