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Japan consumer prices rise for first time in 14 months

·2-min read
A barrage of stimulus and monetary easing packages has seen the inflation rate remain stubbornly low in Japan

Consumer prices rose slightly in Japan in May for the first time in 14 months, data showed Friday, but analysts said they were unlikely to soar above pre-pandemic levels.

Japan has long battled to hit a two percent inflation target seen as key to turbocharging the world's third-largest economy.

A barrage of stimulus and monetary easing packages has seen the rate remain stubbornly low.

The May increase was still modest, with core consumer prices excluding volatile fresh food costs up 0.1 percent from a year earlier.

The rise was 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.

Japan's vaccination programme is picking up after a slow start. Around six percent of the population is now fully vaccinated.

bur-sah/kaf/jfx

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