By Takahiko Wada and Leika Kihara
TOKYO (Reuters) – Core consumer inflation in Japan’s capital, Tokyo, rose 3.2% in May from a year earlier, government data showed on Friday, slowing from the previous month’s increase but remaining well above the central bank’s 2% target.
The stubbornly high inflation in Tokyo, which is seen as a leading indicator of nationwide trends, may keep alive market expectations of a gradual withdrawal of ultra-loose monetary policy later this year.
The rise in the Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, compared with a median market forecast for a 3.3% gain and followed a 3.5% increase in April.
The core-core CPI, which strips away both fresh food and fuel costs, rose 3.9% in May from a year earlier, the data showed. The index, which is closely watched by the BOJ in gauging trend inflation, marked the fastest year-on-year increase since April 1982.
Japan’s economy is finally recovering from the scars of the COVID-19 pandemic, though risks of a global slowdown and rising food prices hang over the outlook for exports and consumption.
With inflation already exceeding its target, markets are rife with speculation the BOJ could soon phase out ultra-loose monetary policy under new governor Kazuo Ueda.
Ueda, however, has brushed aside the chance of a near-term policy tweak, stressing that inflation must sustainably hit the BOJ’s 2% target and accompanied by solid wage growth for the bank to consider phasing out stimulus.
(Reporting by Leika Kihara; Editing by Sam Holmes)
