Japanese inflation accelerated in May, driven partly by higher energy costs, according to government data released on Friday. The Consumer Price Index (CPI) rose by 2.5 percent year-on-year, up from 2.2 percent in April, with energy bills playing a significant role in the increase.
While inflation rates in Japan have been lower compared to other major economies, the Bank of Japan aims for sustainable inflation of two percent. The recent uptick has led to speculation about the timing of the next rate hike by the central bank.
Despite concerns about factors like the war in Ukraine influencing inflation, the BoJ has started making cautious moves away from ultra-loose monetary policies. It raised interest rates for the first time since 2007 in March and announced plans to reduce its holdings of government bonds.
Analysts predict a possible rate hike in July or September, considering the sticky inflation levels. Data also shows positive signs in Japan’s economy, with household spending increasing in April and wage growth at its fastest pace in thirty years.
Overall, the BoJ is closely monitoring wage and price dynamics to maintain a healthy economic cycle.
© 2024 AFP