Japan Core Inflation Accelerates More Than Forecast

(RTTNews) - Japan's core inflation accelerated more than expected to a more than two-year high in May but headline inflation softened slightly, official data showed Friday.

Core inflation that excludes prices of fresh food rose to 3.7 percent from 3.5 percent in April, the Ministry of Internal Affairs and Communications reported. This was the fastest since January 2023. Inflation was seen at 3.6 percent.

Similarly, inflation excluding fresh food and energy, accelerated to 3.3 percent from 3.0 percent in the previous month. Meanwhile, headline inflation softened to 3.5 percent in May from 3.6 percent in April.

Food prices increased 6.5 percent annually due to the 101.7 percent surge in rice prices.

Earlier this week, the Bank of Japan maintained its interest rate and decided to reduce the pace of the amount of bond purchases from next April.

Elsewhere, the minutes of the BoJ policy setting meeting held on April 30 and May 1, released Friday, said the bank should carefully monitor the impact of trade policies on the financial system through various channels.

Further, policymakers said it would be appropriate to continue to raise the policy rate and adjust the degree of monetary accommodation if the outlook for economic activity and prices was realized.

ING economist Min Joo Kang said the despite the rise in core inflation, the BoJ is likely to prioritize the negative impact of US tariffs. BoJ could deliver a 25 basis point rate hike in the fourth quarter, assuming some form of trade deal with the US is finalized in the third quarter, the economist added.