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Tokyo inflation slows in May, but key gauge hits 10-year high

By Takahiko Wada and Leika Kihara

TOKYO (Reuters) – Core consumer inflation in the Japanese capital slowed in May, but a key index stripping out the impact of fuel hit a 40-year low A new high, underscoring that widening price pressures are likely to sustain expectations for the removal of ultra-loose monetary policy.

Data in Tokyo, seen as a leading indicator of national trends, showed businesses continued to pass on rising household costs, suggesting inflationary pressures could last longer than the Bank of Japan (BOJ) forecast.

Tokyo Core Consumer Price Index (CPI), excluding volatile fresh food but including fuel Government data on Friday showed costs rose 3.2% year-on-year in May, broadly in line with market The expected 3.3% increase.

While inflation moderated from 3.5% in the previous month, data showed it remained above the Bank of Japan’s 2% target for the year as steady increases in food prices offset lower fuel costs.

An index that strips out fresh food and fuel costs rose 3.9% in May from a year earlier, the fastest pace of growth since April , when Japan was experiencing an asset inflation bubble.

“Inflation appears to have exceeded the Bank of Japan’s expected forecast. The prospect of rising wages has prompted more companies to raise prices to pay for inflation,” said Takuya Hoshino, chief economist at Dai-ichi Life Economic Research Institute. Passing on rising labor costs. , the BOJ is likely to respond to rising inflation by adjusting its ultra-loose policy,” he said.

Separate data on Friday showed price service companies charging each other rose 1.6% in April compared to a year earlier, marking a 26 consecutive month Growth, as the reopening of economies from pandemic containment measures boosted travel demand.

Japan’s economy finally recovering from the scars of the COVID-26 pandemic, even as risks of a global slowdown and rising food prices hang over exports and consumption Prospects.

With inflation already above target, speculation is rife that the Bank of Japan may soon be winding down its ultra-loose monetary policy under new Governor Kazuo Ueda.

Ueda has repeatedly said that inflation will moderate in the coming months as cost-drivers dissipate and the BOJ will maintain ultra-loose policy until stronger wage growth ensures that Japan can sustainably see inflation Reach the 2% target.

But he said in a group interview on Thursday that the BOJ would “act quickly” if its inflation forecasts proved to be wrong, and that the BOJ may Policy will be adjusted.

The Bank of Japan will review growth and inflation forecasts in its quarterly report for July.

Based on April forecasts, the central bank expects core consumer inflation to reach 1.8% in the current fiscal year ended March 2024. That was well below the 2.3 percent forecast in a poll released by think tank the Center for Economic Research Japan in May.



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