Tokyo Core Inflation Slows, Remains Below BOJ Target

Tokyo Core Inflation Slows in May

Annual core inflation in Japan's capital hit 1.3% in May, staying below the central bank's 2% target for a fourth straight month. The data came in below the median market expectation of 1.5% and marked the sixth consecutive month of slowdown.

Fuel and Education Subsidies Offset Rising Costs

The slowdown was largely attributable to subsidies curbing utility bills and tuition, which offset rising raw material costs from the U.S.-Israeli war on Iran. The Tokyo core CPI, which excludes volatile fresh food costs, followed a 1.5% rise in April.

Analysts Expect Inflation to Re-accelerate

Analysts expect consumer inflation to re-accelerate in coming months as surging oil prices and a weak yen keep import costs high. An index stripping away fresh food and fuel, closely watched by the BOJ, rose 1.6% in May after a 1.9% gain in April.

BOJ Signals Potential Rate Hike

The Bank of Japan kept interest rates steady in April but signaled a possible near-term hike due to mounting inflationary pressures. Markets expect a hike to 1% from 0.75% at the next policy meeting in June.