Japan’s inflation jumps 2.1%, above BOJ target for first time since 2015

Consumer inflation in Japan in April accelerated to 2.1% from a year earlier as rising commodity prices and a weak yen helped push the key figure to a seven-high high. years and above the Bank of Japan’s 2% target for the first time since 2015, according to government data. shown Friday.

The sharp rise in the core consumer price index came as the effect of sharply lower mobile charges – a big drag for months – began to fade from inflation data. The figure compares with a 0.8% increase in March and marked eight consecutive months of gain.

The war in Ukraine has pushed up the prices of energy, including crude oil, as well as raw materials, adding inflationary pressures in resource-poor Japan. While economists say commodity-driven inflation is likely to continue for months, the BOJ is expected to view the rise as temporary and persist with monetary easing.

Core CPI, excluding volatile fresh food, was last above 2% in March 2015, following a consumption tax hike from 5% to 8%, according to the Ministry of Interior and Communications.

Aside from the impact of the tax hike, September 2008 was the last time the closely watched inflation indicator exceeded 2%, meaning it was the first time the threshold was crossed without a tax effect. since the BOJ launched powerful monetary easing under its current governor, who took office in 2013.

“The headline figure is above the BOJ’s 2% target, but that doesn’t mean its target has been met in any real sense. The economy faces downside risks, rising commodity prices raw materials affecting consumer spending,” said Yuichi Kodama, chief economist. at the Meiji Yasuda Research Institute.

Energy prices jumped 19.1%, with gasoline, kerosene, town gas and electricity bills all registering double-digit increases. Gasoline rose 15.7% and kerosene 26.1%, although government subsidies to wholesalers to lower retail prices helped ease upward pressure.

Mobile communications charges fell 22.5% in April, but the pace of the decline slowed from 52.7% a month earlier.

“The basic price trend is the same as before. But what is striking this time is that food prices tend to increase due to supply problems related to the situation in Ukraine,” Kodama said, comparing the current situation to the last time the core CPI was above 2% in 2008.

Even without perishables, food prices rose 2.6% in April, the fastest pace since 2015, with wheat, meat, coffee beans and cooking oil among those rising. affected. Of the 176 items investigated, 127 saw their prices rise, the ministry said.

With a core CPI above 2% widely expected, the BOJ dismissed speculation that it would change its monetary policy. Governor Haruhiko Kuroda said the central bank is aiming for sustainable inflation accompanied by strong wage growth, not inflation driven by temporary increases in commodity prices.

The price hikes come at a delicate time for Japan where consumers are not fully convinced of an economic recovery from COVID-19, and politicians are wary of price-sensitive voters ahead of the House of Councilors election. in July.

The rapid depreciation of the yen, which fell to its lowest level in 20 years against the US dollar, proved a headache for Japan as it drove up import costs.

“Commodity prices had already risen (helped by a global economic recovery and supply shortages) and the weak yen amplified the impact,” a ministry official said.

The BOJ’s firm commitment to ultra-loose monetary policy contrasts with its US and European counterparts cutting stimulus to rein in sharp price rises.

The so-called core-core CPI, excluding energy and fresh food prices, gained 0.8%, marking the first rise since July 2020.

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