By Noriyuki Suzuki,
Japan's consumer inflation in April accelerated 2.1 percent from a year earlier, as higher commodity prices and a weak yen helped lift the key figure to a seven-year high and above the Bank of Japan's 2 percent target for the first time since 2015, government data showed Friday.
The steep rise in the core consumer price index came as the effect of sharply lower mobile communication fees -- a big drag for months -- began to fall out of the inflation data. The figure compared with a 0.8 percent increase in March and marked eight straight months of gain.
The war in Ukraine has sent prices of energy, including crude oil, as well as raw materials higher, adding inflationary pressures to resource-poor Japan. While economists say the commodity-led inflation is likely to continue for months, the BOJ is expected to see the rise as temporary and persist with monetary easing.
The core CPI, excluding volatile fresh food items, was last above 2 percent in March 2015, in the aftermath of a consumption tax hike to 8 percent from 5 percent, according to the Ministry of Internal Affairs and Communications.
Apart from the tax hike impact, September 2008 was the last time the closely watched gauge of inflation was above 2 percent, meaning that it is the first time that the threshold has been crossed without a tax effect since the BOJ launched powerful monetary easing under its current governor, who took the post in 2013.
"The headline figure is above the BOJ's 2 percent target but it doesn't mean that its goal has been achieved in a real sense. The economy is facing downside risks, with higher commodity prices hurting consumer spending," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute.
Energy prices surged 19.1 percent, with gasoline, kerosene, city gas and electricity bills all marking double-digit jumps. Gasoline was up 15.7 percent and kerosene 26.1 percent, though government subsidies to wholesalers to bring down retail prices helped ease the upward pressure.
Mobile communication fees were down 22.5 percent in April but the pace of decline slowed from 52.7 percent a month earlier.
"The basic price trend is the same as before. But what is striking this time is that food prices are trending higher amid supply concerns related to the situation in Ukraine," Kodama said, comparing the current situation to the last time the core CPI was above 2 percent in 2008.
Even without perishables, food prices gained 2.6 percent in April, the fastest pace since 2015, with wheat, meat, coffee beans and cooking oil among those affected. Of the 176 items surveyed, 127 saw higher prices, the ministry said.
With a core CPI reading above 2 percent widely expected, the BOJ shot down speculation it would tweak its monetary policy. Governor Haruhiko Kuroda has said the central bank is aiming for sustainable inflation that is accompanied by strong wage growth, not inflation led by temporary increases in commodity prices.
The price gains come at a delicate time for Japan where consumers are not fully confident of an economic recovery from COVID-19, and politicians are wary of price-sensitive voters ahead of the House of Councillors election in July.
The rapid depreciation of the yen, which has fallen to 20-year lows against the U.S. dollar, has proven a headache for Japan as it has boosted import costs.
"Raw material prices had already been rising (helped by a global economic recovery and supply shortages) and the weaker yen magnified the impact," a ministry official said.
The BOJ's strong commitment to ultraeasy monetary policy contrasts with its U.S. and European counterparts that are dialing back stimulus to rein in sharp gains in prices.
The so-called core-core CPI, excluding both energy and fresh food prices, gained 0.8 percent, marking the first rise since July 2020.
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