MNI BRIEF: Japan Apr Tokyo CPI Rise 3.5% Vs. Mar 3.2%

The y/y rise in the Tokyo core inflation rate unexpectedly accelerated to 3.5% in April from March's 3.2%, indicating that the nationwide April core CPI will gain momentum from March's 3.1% despite government gas and electricity subsidies that run to October, data from the Ministry of Internal Affairs and Communications showed Friday.

Some Bank of Japan officials had expected the strong April print due to ongoing pass-through of cost increases and stronger wage hikes. The Bank expects median core inflation to reach its target 2% by FY25 (see: MNI POLICY: BOJ Board’s FY25 Core CPI Outlook Near 2%).

The core-core CPI (excluding fresh food and energy) rose 3.8% y/y in April, also accelerating from March's 3.4%, due to strong food prices. The April result remained above the BOJ's 2% target for the 11th straight month, a sign that rising raw material costs were steadily pushing up a broad range of prices. Energy price inflation fell 2.6% from March's 0.3% gain, while foods excluding perishables rose 8.9% against the 8.1% noted last month.

Processed food prices – an important input for the BOJ – gained 9.4% in April after rising 8%, while eating and drinking services rose 8.6% from 8.5% in March.