Core-core inflation eases to 2.1%, signaling moderation but complicating the Bank of Japan’s policy path amid cost-push pressures.
Japan’s core consumer inflation remained at 2.7% in May, slightly below April’s 2.8%, as energy prices kept upward pressure on prices. The core-core metric, excluding fresh food and energy, fell to 2.1% from 2.2% in April, reflecting a gradual cooling trend since last June’s peak of 3.6%.
The trimmed mean estimate also declined to 1.5%, reinforcing signs of moderation. However, rising cost-push inflation from Middle East conflicts poses risks, potentially forcing the BOJ to tighten policy for reasons unrelated to wage-driven growth. This could disrupt the fragile wage-price dynamic the central bank has sought to nurture post-pandemic.
Markets are closely watching for signals on whether the BOJ will adjust its ultra-loose stance, balancing inflation control against economic growth risks.