By Noriyuki Suzuki,
Japan's core consumer prices rose 2.8 percent in February from a year earlier, accelerating for the first time in four months, with the fading effects of state subsidies to curb energy costs adding to inflationary pressures, government data showed Friday.
The nationwide core consumer price index, excluding volatile fresh food, was above the Bank of Japan's 2 percent target for the 23rd straight month. It followed a 2.0 percent increase in January.
Core-core CPI, which strips away both energy and fresh food, rose 3.2 percent. The measure, used to gauge underlying inflation, slowed for the six straight month, according to the Ministry of Internal Affairs and Communications.
The BOJ has grown more confident about attaining 2 percent inflation in a positive cycle that also involves sustained wage growth.
At its latest policy meeting earlier in the week, the central bank ended its negative rate and yield cap program, moving away from the unorthodox measures implemented to help Japan break out of deflation.
The latest data showed major contributors to the CPI's increase in February included food and durable goods prices, up 5.3 percent and 3.5 percent, respectively.
But economists believe the trend of easing cost-push inflation remains intact.
To cushion the impact of surging fuel costs, amplified by a weak yen, the government began to support households by reducing utility bills in 2023, sharply curbing electricity and gas prices in the CPI data.
Energy prices fell 1.7 percent, compared with a 12.1 percent drop in January.
Service prices rose 2.2 percent, at the same pace seen in January. They tend to move slowly compared with goods prices that are sensitive to swings in energy and raw material costs.
"Higher prices in the hotel and restaurant sectors have been supporting service price inflation. But we have yet to see an environment in which prices are hiked more broadly to reflect higher wages," said Toru Suehiro, chief economist at Daiwa Securities Co.
"With rounds of food price hikes behind us, we will likely see disinflation," he said, referring to slowing inflation.
Accommodation fees surged 33.3 percent, boosting the overall increase in service prices, as travel demand remained robust with the help of revived inbound tourism.
"We are watching how the results of the 'shunto' wage negotiations will impact prices," a ministry official said. Japanese companies have agreed to raise pay on average by 5.28 percent at this year's labor-management talks, marking the biggest gain in over three decades.
BOJ chief Kazuo Ueda has said that while the 2 percent inflation goal has come into view underlying inflation has yet to reach that level, making the case for financial conditions to remain "accommodative" for the time being.
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