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ShreeMetalPrices: Japan’s core Consumer Inflation rises to 3.4% in April, Pushing BOJ to Rate Hike Pressure


After a respite in the first quarter, Japanese consumer prices index (CPI) inflation surged as expected in April, returning to 40-year highs and putting additional stress on the Bank of Japan (BOJ) to tighten policies this year.

According to Statistics Bureau data, national core consumer prices index inflation. Which exclude volatile goods such as fresh food, gained an annualised 3.4% in April. The reading was in line with expectations and higher than the previous month’s reading of 3.1%.

In April, national CPI inflation reached 3.5%, exceeding predictions of 2.5% and the previous month’s reading of 3.2%. In April, inflation increased by 0.6% over the previous month.

As Japan battles with rising food import costs, food prices have remained one of the major drivers of inflation. This more than compensated lower fuel & electricity prices. While the latter reduced as a result of government subsidies implemented early this year to combat inflation.

Japan’s reliance on imports, from fuel to vital food supplies, has been the most significant contributor to inflation over the last year, owing to broad disruptions in the worldwide supply chain created by the Russia-Ukraine conflict.

Weakness of the yen, caused by a growing gap between local and US interest prices, has also contributed to higher export prices. The yen was flat on Friday after falling for the previous six sessions as concerns of a hawkish Federal Reserve or a strong dollar resurfaced.

Inflation rose above the Bank of Japan’s 2% annual target, raising anticipation that. The central bank could change its yield control policy later this year under incoming Governor Kazuo Ueda.

However, during an April meeting, Ueda dampened expectations for a swift shift in the bank’s dovish position by proposing a year-long fiscal policy review.

Nonetheless, with inflation heading higher after easing slightly in the 1st quarters of 2023. The BOJ is under increased pressures to tighten policy.

The Japanese economy increased faster than projected in the first quarters, according to figures released earlier this week. The number indicated some economic resilience, owing to high tourist and business profitability. And provides the BOJ with additional leeway to explore tightening policy.