Image: Reuters Berita 24 English - Japan's annual core consumer inflation was higher than the central bank's goal for the second mo...
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| Image: Reuters |
Berita 24 English - Japan's annual core consumer inflation was higher than the central bank's goal for the second month in a row in May, according to data released on Friday. This shows that rising global raw material costs are putting more pressure on the country's fragile economy.
The data go against what the Bank of Japan thinks, which is that the recent rise in prices is only temporary and doesn't mean that monetary stimulus should be taken away.
But because wage growth has been slow, many analysts think the BOJ will stay focused on boosting a slowing economy instead of raising interest rates to fight inflation.
The core consumer price index (CPI), which doesn't include volatile fresh food prices but does include fuel prices, went up 2.1% in May from a year earlier, which was the same as the median market prediction.
It stayed above the BOJ's goal of 2 percent for the second month in a row, after rising by 2.1% in April, which was the fastest rate of growth in seven years.
The core-core CPI, which takes out the volatile costs of food and fuel, was up 0.8% from a year ago in May. This was the same rate of growth as in April.
"Even though wage growth is still slow, food prices are going up quite a bit. This could hurt sales and make stores less likely to pass on more costs to customers "The senior economist at Shinkin Central Bank Research Institute, Takumi Tsunoda, said this.
"I don't think core consumer inflation will reach 3% unless prices go up for a wider range of goods and services that people use every day."
Even though rising fuel prices were still the main reason why CPI went up, the rate at which energy prices went up from April to May slowed from 19.1% to 17.1%.
But the prices of food without volatile items like vegetables, meat, and fish went up 2.7% in May, which was the fastest increase since 2015.
Separate data released by the BOJ on Friday showed that the price companies paid each other for services in May was up 1.8% from the same month last year.
The data showed that part of the reason for the increase, which was the fastest annual rate since 2020, was a rise in demand for services after the number of COVID-19 infections went down.
Analysts say that Russia's invasion of Ukraine and a weak yen, which makes imports more expensive, will keep core consumer inflation in Japan above the BOJ's 2 percent goal for most of this year.
But the BOJ doesn't have much to cheer about because it sees this kind of "cost-push" inflation as temporary and a threat to consumption, since people's living costs are going up while their wages aren't growing as fast.
Haruhiko Kuroda, who is in charge of the BOJ, has said many times that the central bank will keep monetary policy very loose until strong domestic demand and strong wage growth become the main things that cause inflation.
