Japan’s inflation slows further

TOKYO: Japan's core inflation slowed for a second straight month in April, likely signalling that the Bank of Japan will be patient in raising interest rates as consumption remains fragile.

While inflation is tracking comfortably above the central bank's 2 percent target, policymakers are keen to see Japan's price impulse bears the stamp of sustainable domestic demand.The nationwide core consumer price index (CPI), which excludes fresh food items, rose 2.2 percent from a year earlier after gaining 2.6 percent in March, government data showed on Friday. It matched the median market forecast.

The "core core" index, which excludes both fresh food and energy costs and is closely watched by the Bank of Japan as a key gauge of broader inflation trends, rose 2.4 percent after increasing 2.9 percent in March. That marked the slowest growth since September 2022.

Inflation data is seen as key to further decisions on rate hikes by the BOJ, which wants to push interest rates higher albeit gradually after ending negative rates in March in a landmark shift away from its decade-long super-easy monetary policy."Weak consumption has made it difficult to raise prices in April and May," Koya Miyamae, senior economist at SMBC Nikko Securities, said.

He said the BOJ would need to see the core-core inflation stop cooling down before raising interest rates. "I think a rate hike in June, July seems a bit premature."The BOJ has said a virtuous cycle of sustained, stable achievement of its 2 percent price target and strong wage growth is crucial for normalising policy.Markets are looking closely now at how much of the large wage increases agreed this spring would translate into selling prices and impact inflation.