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

The Tokyo core inflation rate decelerated to 3.2% y/y rise in May from April's 3.5%, the 12th straight month above the Bank of Japan's 2% target, driven by lower energy prices and indicating that the nationwide May core CPI will likely slow from April's 3.4%, Ministry of Internal Affairs and Communications data showed Friday.

The core-core CPI, a key indicator in the underlying trend of inflation which excludes fresh food and energy, rose 3.9% y/y in May, accelerating from 3.8% in April due to strong food prices. Processed food prices, another key BOJ input, rose 9.5% in May after April's 9.4% gain. Prices for eating and drinking services that BOJ officials are focused rose 8.1% y/y in May after rising 8.6% in April.

The May print was in line with the majority of the BOJ board members view who noted Japan’s core CPI will likely not weaken as much as the Bank’s baseline scenario. BOJ Governor Kazuo Ueda said Thursday the y/y rise in core CPI will likely fall toward the middle of this fiscal year (see: MNI: BOJ's Ueda Uncertain Of H2 2023 Core Inflation Rebound).