Tokyo, Japan – Government data released on Friday revealed that Japan’s core consumer prices saw a 2.2 percent increase in April compared to the same period last year. This marks a slowdown in the pace of growth for the second consecutive month, largely attributed to easing price pressures on food and services.
The rise in the nationwide core consumer price index, excluding volatile fresh food, followed a 2.6 percent gain in March, maintaining a trajectory at or above the Bank of Japan’s 2 percent target for the 25th consecutive month.
Reflecting deeper into underlying price trends, the core-core CPI, which excludes volatile energy and fresh food prices, experienced a 2.4 percent increase, marking its slowest pace since September 2022. This deceleration from a 2.9 percent surge in March underscores a trend in moderation.
Despite the recent easing, Japan continues to grapple with relatively high inflation levels, especially considering its historical battle against deflation. The impact of higher prices has been notable on consumption, contributing to the economy’s contraction in the first three months of 2024.
Among the major components, food prices witnessed a 3.5 percent rise, albeit moderating from a 4.6 percent increase in March. Notably, accommodation fees surged by 18.8 percent, driven by a resurgence in inbound tourism, as indicated by data from the Ministry of Internal Affairs and Communications.
Energy prices saw a marginal 0.1 percent increase, led by kerosene and gasoline, while electricity and city gas prices experienced a decline due to government subsidies aimed at reducing utility bills.
Service prices, after rising by 2.1 percent in March, grew by 1.7 percent in April. This deceleration follows the government’s initiative to effectively make high school education free starting April, thereby affecting service price dynamics.
The trajectory of service price inflation is closely monitored to assess domestic demand strength, which, in turn, influences the Bank of Japan’s confidence in inflation sustainability and interest rate adjustment decisions.
Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute, anticipates a potential acceleration in inflation in the coming months, fueled by anticipated rises in energy prices as government subsidies taper off and a weaker yen amplifies import costs for resource-scarce Japan.
While acknowledging the current pressures on household budgets due to rising prices, Kodama remains optimistic about wage growth outpacing inflation in the July-September quarter, given the favorable outcomes of this year’s annual pay negotiations between labor unions and management, marking the best result for workers in three decades.
