Japan's consumer-price inflation slowed from a decade high as the temporary expiry of a gasoline tax helped ease the pressure from rising food and energy costs.
Core consumer prices, which exclude fruit, fish and vegetables, climbed 0.9 percent in April from a year earlier after rising 1.2 percent in March, the fastest pace since 1998, the statistics bureau said today in Tokyo. The median estimate of 35 economists surveyed by Bloomberg was for a 1 percent gain.
Gasoline prices nationwide fell by about 15 percent last month after the government failed to renew a tax bill that expired April 1. The tax was reinstated this month, and surging costs of food and energy will keep squeezing households and companies, presenting the central bank with the challenge of supporting growth while keeping prices under control.
"The Bank of Japan seems to be carefully monitoring whether recent food and oil price increases will become a trigger for inflationary expectations, which could induce further rounds of price increases,'' said Hideo Kumano, a former central bank official and now chief economist at Dai-Ichi Life Research Institute. "The central bank can neither raise rates nor cut them for the time being because the economy has slipped into a something that looks a bit like stagflation.''
Other reports today showed the unemployment rate rose to a seven-month high of 4 percent and household spending plunged 2.7 percent, the fastest pace since September 2006. The ratio of jobs available to each applicant fell to a three-year low.
The yen traded at 105.57 per dollar as of 8:45 a.m. in Tokyo from 105.54 before the reports were published.
Oil, Wheat
Crude oil exceeded $135 a barrel for the first time last week and gasoline in Japan surged to a record 160.3 yen a liter ($5.75 a gallon) this week. Wheat has soared more than 50 percent in the past year, prompting Japan's government to raise prices of the grain 30 percent last month.
McDonald's Holding Co. Japan Ltd. and Ajinomoto Co. announced plans this month to raise prices to make up for higher energy and grain costs.
McDonald's will raise prices of cheese burgers and Big Macs by about a fifth from today. Ajinomoto's mayonnaise will increase for the second time in a year in July.
Inflation in Tokyo quickened in May, today's report showed, signaling nationwide prices may have risen at a faster pace this month. Tokyo's core prices, a harbinger of the nationwide index, rose 0.9 percent this month from a year earlier, following a 0.7 percent gain in April.
Costlier daily necessities pushed consumer sentiment to a six-year low in April and caused retail sales to grow at the slowest pace since July. Most Japanese households expect prices to keep rising.
Inflation Expectations
The central bank is monitoring how recent price increases may affect consumers' inflationary expectations and companies' price-setting, BOJ Governor Masaaki Shirakawa said this month.
"The Bank of Japan's caution against inflation is accompanied by concerns about an economic slowdown so it's not warranting policy tightening at the moment,'' said Hiromichi Shirakawa, a former central bank official and now chief economist at Credit Suisse Group in Tokyo. "Still, Governor Shirakawa seems to realize that stabilizing inflationary expectations is very important in setting the bank's policy.''
Inflation may exceed the upper limit of the central bank's zero to 2 percent guideline for price stability next quarter, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo.
"Even if that happens, the Bank of Japan won't be prompted to raise interest rates because of its concern about the effect on economy's growth,'' Kono said.
Core consumer prices, which exclude fruit, fish and vegetables, climbed 0.9 percent in April from a year earlier after rising 1.2 percent in March, the fastest pace since 1998, the statistics bureau said today in Tokyo. The median estimate of 35 economists surveyed by Bloomberg was for a 1 percent gain.
Gasoline prices nationwide fell by about 15 percent last month after the government failed to renew a tax bill that expired April 1. The tax was reinstated this month, and surging costs of food and energy will keep squeezing households and companies, presenting the central bank with the challenge of supporting growth while keeping prices under control.
"The Bank of Japan seems to be carefully monitoring whether recent food and oil price increases will become a trigger for inflationary expectations, which could induce further rounds of price increases,'' said Hideo Kumano, a former central bank official and now chief economist at Dai-Ichi Life Research Institute. "The central bank can neither raise rates nor cut them for the time being because the economy has slipped into a something that looks a bit like stagflation.''
Other reports today showed the unemployment rate rose to a seven-month high of 4 percent and household spending plunged 2.7 percent, the fastest pace since September 2006. The ratio of jobs available to each applicant fell to a three-year low.
The yen traded at 105.57 per dollar as of 8:45 a.m. in Tokyo from 105.54 before the reports were published.
Oil, Wheat
Crude oil exceeded $135 a barrel for the first time last week and gasoline in Japan surged to a record 160.3 yen a liter ($5.75 a gallon) this week. Wheat has soared more than 50 percent in the past year, prompting Japan's government to raise prices of the grain 30 percent last month.
McDonald's Holding Co. Japan Ltd. and Ajinomoto Co. announced plans this month to raise prices to make up for higher energy and grain costs.
McDonald's will raise prices of cheese burgers and Big Macs by about a fifth from today. Ajinomoto's mayonnaise will increase for the second time in a year in July.
Inflation in Tokyo quickened in May, today's report showed, signaling nationwide prices may have risen at a faster pace this month. Tokyo's core prices, a harbinger of the nationwide index, rose 0.9 percent this month from a year earlier, following a 0.7 percent gain in April.
Costlier daily necessities pushed consumer sentiment to a six-year low in April and caused retail sales to grow at the slowest pace since July. Most Japanese households expect prices to keep rising.
Inflation Expectations
The central bank is monitoring how recent price increases may affect consumers' inflationary expectations and companies' price-setting, BOJ Governor Masaaki Shirakawa said this month.
"The Bank of Japan's caution against inflation is accompanied by concerns about an economic slowdown so it's not warranting policy tightening at the moment,'' said Hiromichi Shirakawa, a former central bank official and now chief economist at Credit Suisse Group in Tokyo. "Still, Governor Shirakawa seems to realize that stabilizing inflationary expectations is very important in setting the bank's policy.''
Inflation may exceed the upper limit of the central bank's zero to 2 percent guideline for price stability next quarter, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo.
"Even if that happens, the Bank of Japan won't be prompted to raise interest rates because of its concern about the effect on economy's growth,'' Kono said.
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