Japan’s core inflation rate hits 3.2pc in January

According to government data released Friday, Japanese inflation picked up speed in January, putting additional strain on households as prices outside of fresh food increased 3.2% year over year.

Speculation is growing that the Bank of Japan may hike interest rates again to counter rising prices and as part of its retreat from years of aggressive monetary easing to boost the moribund Japanese economy.

The internal affairs ministry reported that the core Consumer Price Index (CPI) increased by 3.1 percent, faster than the market’s forecast of 3.0 percent.

Including volatile fresh food costs, overall inflation increased by 4.0 percent year over year, accelerating from 2.9 percent in November and 3.6 percent in December.

In January, the price of cabbage almost tripled year-on-year after last year’s record summer heat and heavy rain ruined crops in what media have dubbed a “cabbage shock”.

The price of rice also soared more than 70 percent, the data showed, while electricity bills jumped by 18 percent.

“While the increase in electricity and other prices narrowed, the increase for gasoline and kerosene expanded,” the ministry said.

Last week, the government said it would release a fifth of its emergency rice stockpile after hot weather, poor harvests and panic buying over a “megaquake” warning pushed up its cost.

Although Japan has previously drawn from its stockpiles during emergencies, supply chain issues were the reason for the decision for the first time since the stockpile was established in 1995.
After raising interest rates for the first time in 17 years in March, the Bank of Japan did so once again last month, indicating that additional hikes might follow.

According to the bank, the decision was supported by “steadily” increasing wages and “stable on the whole” financial markets.

The BoJ had remained an exception even as other central banks have increased borrowing costs in recent years.
However, in March, it finally raised rates above zero, indicating a shift away from measures intended to combat Japan’s “lost decades” of stagnant or declining prices and economic stagnation.

Recent gross domestic product (GDP) figures showed that Japan’s economic growth slowed sharply last year, although the rate for the fourth quarter topped expectations.

It comes as businesses worry about how the fourth-largest economy in the world would be affected by US President Donald Trump’s tariffs and other protectionist trade policies.

The trade minister is planning a trip to the US to request tariff exemptions, according to a report in Japanese media on Thursday.