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Japan consumer prices rise for first time in 14 months

Shoppers browse in a clothing store at the Creamall shopping arcade in Kawagoe, Saitama prefecture. Photo: Reuters.

Japan has long battled to hit a 2% inflation target but analysts said prices were unlikely to soar above pre-pandemic levels

Japan’s core consumer prices rose for the first time in 14 months on climbing energy prices, government data showed Friday.

The consumer price index (CPI) rose 0.1% in May from a year earlier, a modest increase  largely the result of a rebound in energy prices, after oil prices dipped last spring with knock-on effects for other energy prices.

It will be welcome news for the Bank of Japan, which will make a policy announcement later Friday after a two-day meeting.

The bank is not expected to make any major moves, given the inflationary trend in Japan will be significantly weaker than those in other parts of the world.

“While we expect headline inflation to rise further over the coming months, in contrast to many other large advanced economies Japan is unlikely to experience significant ‘reopening’ inflation, due to lower pent-up demand and far stickier inflation expectations,” said Capital Economics Japan economist Tom Learmouth.

“We think underlying inflation will rise as price pressures in the services sector build further due to a likely vaccine bounce in the second half of this year,” he added. “However, we doubt underlying inflation will overshoot its pre-virus average by much.”

Japan has seen a much smaller virus outbreak than many countries, with just over 14,000 deaths, and it has avoided the harsh lockdowns used elsewhere.

A virus state of emergency that largely bans the sale of alcohol by bars and restaurants and asks them to close by 8pm will end on Sunday.

But it will be replaced in Tokyo and other economic hubs like Osaka with measures that will still restrict opening hours and only allow alcohol sales until 7pm.

“Looking ahead, we believe the core CPI is likely to hover around zero to slightly positive year-on-year as energy prices pick up momentum,” Kazuma Maeda, Barclays economist, said.

“From August to December, we also expect a boost from sharply higher hotel charges, reflecting base effects linked to the previous year’s steep drop under the Go to Travel campaign. ”

With reporting by Agence France-Presse


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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.


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