MNI BRIEF: Japan May Core CPI Rises 3.7% Vs. April 3.5%

Japan’s annual core consumer inflation rate accelerated to 3.7% y/y in May from 3.5% in April, driven by rising food prices excluding perishables, particularly higher rice costs, data from the Ministry of Internal Affairs and Communications showed Friday.

The index remained above the Bank of Japan’s 2% target for the 38th straight month and the May index is the highest level since January 2023 when it rose 4.2%.

Core inflation excluding perishables rose 7.7% y/y in May, up from 7.0% in April, while energy price growth slowed to 8.1% from 9.3%.

The core-core CPI, which strips out both fresh food and energy and is closely watched as an underlying inflation measure, rose 3.3% y/y in May, up from 3.0% in April.

Services prices, a key BOJ focus for assessing the strength of the wage-price cycle, rose 1.4% y/y in May, slightly up from 1.3% in April, but remained below the 2% mark, indicating weak momentum and the need for further gains to achieve the BOJ’s inflation target sustainably.

Prices for processed foods, which account for 15% of the CPI and are seen as sensitive to economic activity, rose 5.2% y/y in May, accelerating from April’s 4.7%.

The CPI print follows the BOJ board's decision this week to hold the policy rate at 0.5%. (See MNI BOJ WATCH: Ueda Flags Gradual Hikes, Warns Of JGB Risks)