Government subsidies kept Japan’s core inflation below 2%, masking underlying price pressures from rising import costs.
Japan’s core consumer price index remained at 1.4% year-over-year in May, matching expectations, as fuel subsidies suppressed inflation readings. Headline CPI rose 1.5%, also in line with forecasts, while core-core CPI slowed to 1.8%, its lowest since September 2022.
The data reflects temporary relief from government measures rather than sustained disinflation, with producer prices accelerating since March. Bank of Japan officials have warned that delaying policy adjustments could risk long-term economic damage, despite the muted CPI print.
USD/JPY traded near 161 on Friday, with the yen’s weakness continuing to fuel import-driven inflation. Markets remain focused on potential BoJ rate moves, though the latest data offers no immediate catalyst for a shift.