Latest news with #BOJ
The Star
4 hours ago
- Business
- The Star
Japan's core inflation hits 2-year high, keeps rate-hike bets alive
TOKYO: Japan's core inflation hit 3.7% in May, the fastest annual pace in more than two years and keeping pressure on the central bank to resume interest rate hikes. The data underscores the challenge the Bank of Japan faces in juggling mounting pressure from sticky food inflation and risks to the fragile economy from U.S. tariffs. The increase in the core consumer price index (CPI), which excludes volatile fresh food costs, compared with a median market forecast for a 3.6% gain and followed a 3.5% rise in April. It was the fastest annual pace since 4.2% marked in January 2023, government data showed on Friday. A separate index that strips away the effects of both volatile fresh food and fuel costs, which is closely watched by the BOJ as a better indicator of demand-driven price moves, rose 3.3% in May from a year earlier after a 3.0% rise in April. It was the fastest year-on-year rise since January 2024, when the index was up 3.5%. Stubbornly high prices of food, particularly those of Japan's staple rice, remained the main driver of inflation, the data showed. Food prices, excluding those of volatile fresh food, rose 7.7% in May from a year earlier, faster than the 7.0% gain in April, reflecting the pain households are feeling from rising living costs. The price of rice doubled in May from year-before levels, the data showed. Service-sector inflation hit 1.4% in May, slightly faster than the 1.3% in April but much slower than the 5.3% increase for goods prices, the data showed. The BOJ ended a massive stimulus programme last year and in January raised short-term rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target. While the central bank has signalled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. A slight majority of economists in a Reuters poll expected the BOJ's next 25-basis-point increase to come in early 2026. - Reuters
Reuters
4 hours ago
- Business
- Reuters
Slow rate hikes could cause wage-price spiral, BOJ paper says
TOKYO, June 20 (Reuters) - Hiking interest rates only gradually as raw material costs rise could heighten the risk of an upward spiral in wages and consumer prices, the Bank of Japan said in a research paper released this week. The paper's publication on Thursday comes as the central bank faces an increasingly complicated policy environment, with inflation at a more than two-year high and U.S. tariffs fanning economic uncertainty. While the staff papers do not represent the BOJ's official view on monetary policy, they provide hints on key topics of attention within the central bank in setting interest rates. The BOJ staff paper, using data from 2002 to 2024, analysed trends in Japan and Europe - which both rely heavily on imported commodities - to study the extent to which rising material costs led to second-round effects on inflation. In Japan, the pass-through of prices from rising raw materials was more moderate than in Europe, the paper said. The second-round effects were moderate but sustained in both Japan and Europe, it said. "Both in Japan and Europe, the initial effects of high raw material costs were the main cause of inflationary trends since 2020. The second-round effects may have heightened the sustainability of price rises," the paper said. Central banks typically raise interest rates to avoid second-round effects on inflation, or a state in which initial price shocks like higher energy costs trigger a spiral of rising wages and inflation that could lead to a broad-based, persistent inflationary environment. A closer look at Japan's data suggested the BOJ's slow pace of interest rate hikes could be enhancing the second-round effects on inflation, the paper said. Structural changes in Japan's labour market could also be making wages less rigid - or more likely to move flexibly reflecting a tight job market - and enhancing the second-round effects on inflation than in the past, the paper said. The analysis comes amid heightening attention within the BOJ board on how persistent rises in food and raw material costs could affect underlying inflation, and households' perception of future price moves. While uncertainty over U.S. tariff policy has put the BOJ on hold in raising interest rates, Governor Kazuo Ueda has signaled the bank's resolve to keep pushing up borrowing costs if Japan stays on course to durably hit the bank's 2% inflation target. Japan's core inflation hit a more than two-year high in May and exceeded the central bank's 2% target for well over three years, keeping it under pressure to resume rate hikes despite economic headwinds from U.S. tariffs.
New Straits Times
6 hours ago
- Business
- New Straits Times
Japan's core inflation hits two-year high, keeps rate-hike bets alive
TOKYO: Japan's core inflation hit a more than two-year high in May and exceeded the central bank's two per cent target for well over three years, keeping it under pressure to resume interest rate hikes despite economic headwinds from US tariffs. The data underscores the challenge the Bank of Japan faces in juggling pressure from sticky food inflation and risks to the fragile economy from uncertainty over President Donald Trump's trade policy. The core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.7 per cent in May from a year earlier, data showed on Friday, exceeding market forecasts for a 3.6 per cent gain and accelerating from a 3.5 per cent increase in April. The rise, which was the fastest annual pace since the 4.2 per cent hit in January 2023, was driven largely by stubbornly high prices of food - particularly those of Japan's staple rice that saw prices double in May from year-before levels. While slower than the 5.3 per cent increase in goods prices, service-sector inflation accelerated to 1.4 per cent in May from 1.3 per cent in April in a sign firms were steadily passing on labour costs. "Given heightened uncertainty over US tariff policy, the BOJ is taking a wait-and-see approach to scrutinise developments in bilateral trade talks," said Ryosuke Katagi, market economist at Mizuho Securities. "But today's data shows anew that domestic inflation is heightening particularly that for goods. When looking just at price moves, conditions for additional rate hikes will likely stay in place throughout 2025," he said. A separate index that strips away the effects of both volatile fresh food and fuel costs rose 3.3 per cent in May from a year earlier after a 3.0 per cent rise in April, the data showed. The rise in the index, which is closely watched by the BOJ as a better indicator of demand-driven price moves, was the fastest since January 2024 when it increased 3.5 per cent. Food prices, excluding those of volatile fresh food, rose 7.7 per cent in May from a year earlier, faster than the 7.0 per cent gain in April, reflecting the pain households are feeling from rising living costs. BOJ policymakers expect such cost-push pressures to moderate later this year and, coupled with expected rises in wages, underpin consumption and keep Japan on track to durably achieve their 2 per cent inflation target backed by solid domestic demand. Takeshi Minami, chief economist at Norinchukin Research Institute, expects inflation to slow in the latter half of this year and fall below 2 per cent early 2026 as food price rises moderate. Government subsidies to curb gasoline costs will also likely mitigate upward price pressure from any spike in oil costs caused by the escalating Middle East conflict, he added. "The BOJ will enter a period where it weighs the hit to exports from Trump tariffs and the impact intensifying domestic labour shortages could have on wages," Minami said. The BOJ ended a massive stimulus programme last year and in January raised short-term rates to 0.5 per cent on the view Japan was on the cusp of durably meeting its 2 per cent inflation target. While the central bank has signalled readiness to raise rates further, the repercussions from higher US tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. Minutes of the BOJ's April 30-May 1 meeting showed the board divided on the future inflation path. While some warned that cheap Chinese imports could push down prices, others said inflation could overshoot the BOJ's projections as firms have become more willing to raise prices and wages. A slight majority of economists in a Reuters poll expected the BOJ's next 25-basis-point increase to come in early 2026.
Yomiuri Shimbun
7 hours ago
- Business
- Yomiuri Shimbun
Japan's Core Inflation Hits 2-year High, Keeps Rate-Hike Bets Alive
Yomiuri Shimbun file photo Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi inspects the rice section of a supermarket in Koto Ward, Tokyo, in May. TOKYO (Reuters) — Japan's core inflation hit 3.7% in May, the fastest annual pace in more than two years and keeping pressure on the central bank to resume interest rate hikes. The data underscores the challenge the Bank of Japan faces in juggling mounting pressure from sticky food inflation and risks to the fragile economy from U.S. tariffs. The increase in the core consumer price index (CPI), which excludes volatile fresh food costs, compared with a median market forecast for a 3.6% gain and followed a 3.5% rise in April. It was the fastest annual pace since 4.2% marked in January 2023, government data showed on Friday. A separate index that strips away the effects of both volatile fresh food and fuel costs, which is closely watched by the BOJ as a better indicator of demand-driven price moves, rose 3.3% in May from a year earlier after a 3.0% rise in April. It was the fastest year-on-year rise since January 2024, when the index was up 3.5%. Stubbornly high prices of food, particularly those of Japan's staple rice, remained the main driver of inflation, the data showed. Food prices, excluding those of volatile fresh food, rose 7.7% in May from a year earlier, faster than the 7.0% gain in April, reflecting the pain households are feeling from rising living costs. The price of rice doubled in May from year-before levels, the data showed. Service-sector inflation hit 1.4% in May, slightly faster than the 1.3% in April but much slower than the 5.3% increase for goods prices, the data showed. The BOJ ended a massive stimulus program last year and in January raised short-term rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target. While the central bank has signaled readiness to raise rates further, the economic repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase. A slight majority of economists in a Reuters poll expected the BOJ's next 25-basis-point increase to come in early 2026.
RTHK
8 hours ago
- Business
- RTHK
Japan's core inflation rate hits 3.7pc in May
Japan's core inflation rate hits 3.7pc in May Stubbornly high food prices remain the main driver of inflation, the data showed. File photo: Reuters Japan's core inflation hit 3.7 percent in May, the fastest annual pace in more than two years and keeping pressure on the central bank to resume interest rate hikes. The data underscores the challenge the Bank of Japan faces in juggling mounting pressure from sticky food inflation and risks to the fragile economy from US tariffs. The increase in the core consumer price index (CPI), which excludes volatile fresh food costs, compared with a median market forecast for a 3.6 percent gain and followed a 3.5 percent rise in April. It was the fastest annual pace since 4.2 percent marked in January 2023, government data showed on Friday. A separate index that strips away the effects of both volatile fresh food and fuel costs, which is closely watched by the BOJ as a better indicator of demand-driven price moves, rose 3.3 percent in May from a year earlier after a 3 percent rise in April. It was the fastest year-on-year rise since January 2024, when the index was up 3.5 percent. Stubbornly high prices of food, particularly those of Japan's staple rice, remained the main driver of inflation, the data showed. Food prices, excluding those of volatile fresh food, rose 7.7 percent in May from a year earlier, faster than the 7 percent gain in April. The price of rice doubled in May from year-before levels, the data showed. Service-sector inflation hit 1.4 percent in May, slightly faster than the 1.3 percent in April but much slower than the 5.3 percent increase for goods prices, the data showed. The BOJ ended a massive stimulus programme last year and in January raised short-term rates to 0.5 percent on the view Japan was on the cusp of durably meeting its 2 percent inflation target. (Reuters)
