MNI BRIEF: Japan May Core CPI Rises 3.2% Against Apr's 3.4%

Japan's annual core consumer inflation rate printed at 3.2% y/y in May from April's 3.4%, Ministry of Internal Affairs and Communications data showed Friday.

Higher food prices excluding fresh food and lower energy price drove the result and could force the BOJ to revise up its the median forecast for core CPI this fiscal year above 2% from April’s 1.8%. The strong price view may also prompt the BOJ to change its outlook that the y/y rise in core CPI will fall below 2% toward the middle of fiscal 2023.

The underlying inflation rate measured by core-core CPI (excluding fresh food and energy) rose 4.3% y/y in May, accelerating from April's 4.1%, due to pass-through of cost increases. The negative contribution from energy items on CPI widened to -0.69pp in May from -0.37pp in April.

Prices excluding perishables rose 9.2% y/y in May against 9.0% in April and its positive contribution widened to 2.07pp from 2.02pp. Prices for processed foods, accounting for 15% of the total CPI – a point BOJ officials focus on which is sensitive to economic activities – rose 9.6% in May from April’s 9.3%, indicating further pass-through of cost increases.