The pace of Japanese inflation accelerated in May partly due to higher energy bills, government data showed on Friday, as analysts speculated on the timing of the Bank of Japan’s next rate hike.
The Consumer Price Index (CPI) — which excludes volatile fresh food prices — rose 2.5 percent year-on-year, compared with the 2.2 percent recorded in April by the interior ministry.
The ministry said “energy, including electricity and gas bills, contributed” to the acceleration, which was slightly below market expectations for 2.6 percent.
While the United States and other major economies have struggled with high inflation in recent years, price increases in Japan have been less extreme.
The Bank of Japan is targeting sustainable demand-driven inflation of two percent. While the CPI has been above this target since April 2022, the central bank has warned that this is due to volatile factors such as the war in Ukraine.
With the election looming, the BoE was set to keep UK interest rates on hold
Recently, however, the BoJ has taken careful steps away from its long-standing ultra-loose monetary policies.
The BoJ said last week it would trim its huge hoard of government bonds, having raised interest rates for the first time since 2007 in March.
“With inflation remaining somewhat stable … a further rate hike in July or September is likely,” although “the timing for this may remain unclear,” said Katsutoshi Inadome, senior strategist at SuMi TRUST. earlier this month.
Excluding fresh food and energy, Japanese prices rose 2.1 percent in May, beating market expectations for 2.2 percent and following a 2.4 percent gain in April, data showed on Friday.
Data released earlier this month showed Japanese household spending rose in April for the first time in 14 months, with wages rising at the fastest pace in three decades.
UK inflation is slowing to the central bank’s 2% target
Wage growth is a key factor in the BoJ’s policy decisions as it pursues a “virtuous cycle between wages and prices”.
Source: AFP