A vendor sells chocolates at a shop at the Ameyoko shopping district in Tokyo, Japan, May 20, 2022. REUTERS/Kim Kyung-Hoon/File photo
TOKYO – Core inflation in Japan’s capital slowed below the central bank’s 2 percent target to hit the lowest level in nearly two years, data showed on Friday, underscoring policymakers’ view that cost-push pressures will continue to ease in coming months.
The focus shifts to whether wages will rise enough to underpin consumption and help Japan sustainably achieve the Bank of Japan’s 2 percent inflation, which it describes as a prerequisite for phasing out its massive monetary stimulus, analysts say.
The core consumer price index (CPI) in Tokyo, a leading indicator of nationwide inflation trends, rose 1.6 percent in January from a year earlier, government data showed, slower than a median market forecast for a 1.9-percent gain.
‘Core core’ index
The Tokyo core inflation, which excludes volatile fresh food but includes fuel costs, slowed for the third straight month to the lowest level since March 2022, due mostly to falling energy prices. It followed a 2.1-percent rise in December.
READ: Japanese firms, unions kick off wage talks
The so-called “core core” index that strips away both fresh food and fuel prices – closely watched by the BOJ as a gauge of broader price trends – rose 3.1 percent in January after increasing 3.5 percent in December, the data also showed.
With inflation having exceeded the BOJ’s 2 percent inflation target for more than a year, many market players expect the bank to end negative interest rates this year with a growing number of them betting on this to happen in March or April.
READ: BOJ keeps ultra-easy policy, signals conviction on hitting price goal
The BOJ has pledged to keep ultra-loose policy until the recent cost-push inflation is replaced by price rises driven by robust domestic demand, accompanied by higher wages.
The central bank maintained its ultra-easy monetary settings on Tuesday but signaled its growing conviction that conditions for phasing out its huge stimulus were falling into place, suggesting that an end to negative rates was nearing.