BOJ's Underlying Inflation Measures in April All Fall Below 2%

The Bank of Japan’s (BOJ) key measurements of underlying inflation in April all fell below its 2 per cent target for the first time since August 2022, data showed on Tuesday (May 28), heightening uncertainty on the timing of its next interest rate hike.

The weighted median inflation rate, among the three indicators closely watched as a gauge on whether price rises are broadening, rose 1.1 per cent in April from a year earlier after a 1.3 per cent gain in March, the data showed.

The trimmed mean index, which excludes the upper and lower tails of the price change distribution, rose 1.8 per cent in April from a year earlier, slowing from the previous month’s 2.2 per cent.

A third index that measures the inflation rate with the highest density in the distribution also rose 1.6 per cent in April, slowing from the previous month’s 1.9 per cent gain, the data showed.

The BOJ ended eight years of negative interest rates and other remnants of its radical monetary stimulus in March, on the view that sustained achievement of its 2 per cent inflation target has come into sight.

BOJ governor Kazuo Ueda has said the central bank will raise interest rates from current near-zero levels if underlying inflation accelerates towards 2 per cent, as it currently projects.

The data cast doubt on the BOJ’s view that price rises are broadening beyond those driven by rising raw material costs, and likely to be sustained backed by robust domestic demand. Reuters

May 29, 2024