Key facts
- Japan's core consumer inflation is projected to be 1.4% in May, unchanged from April.
- This marks the fourth consecutive month inflation has been below the Bank of Japan's 2% target.
- Wholesale prices accelerated to a three-year high of 6.3% in May.
- The Bank of Japan is expected to raise interest rates to 1.00% at its upcoming policy meeting.
Japan's core consumer inflation is expected to have remained below the Bank of Japan's 2% target for a fourth consecutive month in May, according to a Reuters poll of economists. The nationwide core consumer price index, excluding fresh food, is forecast to have risen 1.4% year-on-year, unchanged from April.
Analysts attribute the steady inflation rate to the end of government fuel subsidies, while noting that the pace of decline in energy prices has narrowed due to the situation in Iran. However, surging fuel costs stemming from the Middle East conflict are anticipated to accelerate price growth in the coming months. In response, the Japanese government has finalized a $19 billion supplementary budget to mitigate the impact of rising energy costs on households.
Japan's wholesale prices saw a significant acceleration, rising 6.3% in May, the fastest pace in three years, as companies passed on increased costs from energy shocks. Meanwhile, the Bank of Japan is scheduled to hold a policy meeting where it is expected to raise interest rates to 1.00%, a 31-year high, signaling its commitment to combating inflation risks.