This is a yen-negative, JGB-positive print in the near term.
This is a yen-negative, JGB-positive print in the near term. The magnitude of the miss on core-core, coming in at 1.9% against a 2.3% expectation and prior, is significant enough to give the BoJ genuine cover to delay a June hike despite the hawkish signals delivered at the April meeting.
Rate markets will likely push out their June hike pricing on this data. The structural tension remains, however. Fuel subsidies are suppressing the headline and core readings artificially, and analysts broadly expect inflation to re-accelerate as oil price pressures and yen weakness feed through import costs.
The BoJ is caught between data that argues for patience and a currency dynamic that argues for action: the slow pace of hikes is itself a driver of yen weakness, which in turn generates the import cost inflation that ultimately forces the bank’s hand. – Summary: Tokyo headline CPI came in at 1.5% year-on-year in April, below the 1.6% forecast and up from 1.4% in March Core CPI excluding fresh food rose 1.5% year-on-year, its slowest pace since March 2022, missing the 1.8% forecast and slowing from 1.7% in March Core-core CPI excluding fresh food and energy rose 1.9% year-on-year, well below the 2.3% forecast and the 2.3% prior reading, marking a significant deceleration in the measure most closely watched by the BoJ as a gauge of trend inflation Tokyo core inflation has now remained below the BoJ’s 2% target for a third consecutive month, with fuel subsidies cited as a key factor suppressing readings despite rising raw material costs linked to the Middle East conflict Falling nursery fees and slower goods inflation were also noted as contributors to the cooling in price pressures The BoJ kept rates on hold at its April meeting but signalled a possible hike as soon as June, citing mounting inflationary pressures; the Tokyo data complicates that guidance The BoJ has raised rates several times since exiting its decade-long stimulus programme in 2024, most recently in December…