Japan core inflation softens to over four year low, weakening case for BOJ rate hike
Japan's core inflation eased more than expected in April to its lowest level since March 2022, potentially weakening the case for an early rate hike
Japan's core inflation eased more than expected in April to its lowest level since March 2022, potentially weakening the case for an early rate hike by the Bank of Japan. Core inflation — which strips out prices of fresh food — came in at 1.4%, lower than the 1.7% expected by economists polled by Reuters and below the 1.8% reading in March. Headline inflation was at 1.4%, down from March's 1.5% and the fourth straight month below the central bank's 2% target.
The so-called "core-core" inflation rate, which is watched by the Bank of Japan and strips out food and energy prices, fell to 1.9% from 2.4%. Energy prices fell 3.9% in April compared with a 5.7% decline in March, amid the Iran war. Japan's Nikkei 225 opened up 0.96% following the data release, leading major Asian indexes, while the yen weakened marginally to 159.03 against the dollar.
The inflation figure was "a little bit of a surprise, but not too much of a concern," said Andrew McCagg, customer portfolio manager at Nomura Asset Management on CNBC's "Squawk Box Asia." He explained that headline inflation was expected to dip below 2% due to government fuel subsidies, but the lower-than-expected figure was also due to government subsidies for school tuition. The Iran war, he added, would push inflation back up in the coming months.
"Unlike in other markets, when we talk about inflationary concerns in Japan, it's still more of a concern that we fall back into deflation rather than inflation getting out of hand," McCagg added.
The BriefWire