A key measure of Tokyo's inflation unexpectedly slowed, remaining below the Bank of Japan's policy target and reinforcing the cautious approach of policymakers to hold off on raising interest rates. Data released Friday by Japan's Ministry of Internal Affairs and Communications showed the core Consumer Price Index (CPI) for Tokyo, which excludes fresh food, rose 1.5% year-on-year in April. This marks the smallest increase since March 2022.
This inflation rate has now slowed for five consecutive months, representing the longest period of deceleration since 2009. The figure also fell short of the median economist forecast of 1.8%. A separate indicator that strips out both fresh food and energy, reflecting the underlying trend of core inflation, increased by 1.9% compared to the same period last year. The headline CPI, which includes all product categories, also rose by 1.5%.
The data suggests that the effects of geopolitical tensions involving Iran and high oil prices have not yet significantly impacted Japanese inflation, contrary to earlier expectations from some Bank of Japan officials who had anticipated a notable increase in price pressures. Earlier this week, while some policy board members showed a preference for an earlier interest rate hike, the majority saw no immediate need for action, leading to a vote to keep interest rates unchanged.
Bank of Japan Governor Kazuo Ueda also signaled that, due to the conflict's impact on economic growth prospects, the central bank may need to maintain its accommodative monetary policy stance for a longer duration.
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