Japan's Inflation Continues to Exceed BOJ's 2% Target
Sharp Rise in Food Prices Drives CPI Surge
Interest Rate Hike Expectations Grow Amid Persistent Price Increases
In May, Japan's core Consumer Price Index (CPI) surged by 3.7% compared to the previous year, marking the highest rate of increase in the past two years. As the inflation rate continues to exceed the target of 2%, there are growing expectations that the Bank of Japan (BOJ), Japan's central bank, may raise interest rates.
On the 20th, Japan's Ministry of Internal Affairs and Communications announced that the core CPI, which excludes fresh food, rose by 3.7% compared to the same month last year. This is the highest level since early 2023.
The rate of increase expanded by 0.2 percentage points from April's 3.5%. Japan's consumer price inflation has remained in the 3% range for six consecutive months.
Kyodo News analyzed that the sharp rise in food prices, including a 101.7% increase in rice products, which more than doubled, led the overall surge in prices. The Japanese government began releasing so-called "half-price reserve rice" in late May, but Kyodo added that this measure was barely reflected in the latest survey.
Furthermore, there are observations that the continued upward trend in prices could influence Japan's interest rate policy. Kyodo noted, "The overall trend of rising prices is likely to affect the BOJ's decision on additional interest rate hikes."
BOJ Governor Kazuo Ueda has stated that interest rates could be raised if prices rise in a stable manner. At an international conference hosted by the BOJ on May 27, he said, "If confidence in the economic outlook increases, we will adjust the level of monetary easing as necessary to ensure the sustainability of the price target." However, considering economic uncertainties such as U.S. tariff policies, the BOJ has kept the benchmark interest rate at "around 0.5%" for three consecutive meetings.
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