Core consumer prices rose 2.1% in May from a year earlier, government data showed on Friday, topping the Japanese inflation target for the second straight month.
The core consumer price index, which includes oil products but excludes fresh food prices, compared with economists’ median estimate for a 2.1% annual gain, which was also the actual reading in April.
Stripping away the effect of fresh food and energy, consumer prices rose 0.8% in April from a year ago.
Japanese inflation was expected to increase after a recent deprecation in the yen combined with higher energy and food price pressures.
“The Bank of Japan will be paying more attention to inflation if there are any signs of increasing demand pressure while labour market tightening could lead to stronger wage growth,” said Min Joo Kang, senior economist for South Korea and Japan at ING.
The CPI figures are the first in a flurry of Japanese data expected over the next week.
Industrial production is expected to rebound from the previous month’s contraction on the back of better domestic demand.
“Gains may be capped as global supply chain disruptions are still weighing on overall production activity,” Kang said.
The unemployment rate should remain unchanged at 2.5%, she forecast, as services sector hiring is still picking up while there is some slowdown in manufacturing.
- Reuters, with additional editing by George Russell