Japan inflation likely slowed again, may ease cost pressure – Reuters poll

By Thomson Reuters May 17, 2024 | 12:52 AM

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s core consumer inflation probably slowed for a second straight month in April from a year earlier, a Reuters poll of 18 economists showed on Friday, likely easing cost-push pressure.

The core consumer prices index (CPI) is expected to decelerate to 2.2% from 2.6% in March, the lowest level in three months, but still at or above the central bank’s 2% target for more than two years.

The data will be key to further decisions on rate hikes by the Bank of Japan (BOJ), which wants to push interest rates higher albeit gradually, saying it should keep accommodative conditions for the time being due to a fragile economy.

The BOJ raised interest rates in March for the first time since 2007 in a landmark shift away from negative rates. Now, the central bank is coming under pressure from some lawmakers to raise rates further to cushion a blow from the yen’s rapid weakening to levels unseen since 1990.

The CPI data, which excludes fresh food but includes oil products, will be released by the ministry of internal affairs and communications on Friday, May 24.

Government data on Thursday showed the Japanese economy contracted 2% annualised in the first quarter, with domestic consumption hit hard by rising living costs due to the weak yen and with a 5% slump in exports of goods and services.

Weak exports are a source of concern for the trade-reliant Japanese economy, which counts on external demand to offset weak domestic consumption.

Analysts polled by Reuters expect Japan’s exports grew 11.1% in April from a year earlier, accelerating from March’s 7.3% gain, thanks in part to the boost in value to shipments from the weak yen.

Imports also probably rose 9.0% in April year-on-year, swinging from an annual 5.1% decline in the previous month. As a result, the trade balance, or exports minus imports, swung to a deficit of 339.5 billion yen ($2.18 billion), the trade data is expected to show on Wednesday, May 22.

Highlighting soft domestic demand, core machinery orders, a key gauge of capital expenditure in the next six to nine months, will probably show a decline of 2.2% in March, swinging from 7.7% growth in the previous month.

On a year-on-year basis, core orders probably rose 2.3% in March from a 1.8% decline in the previous month.

($1 = 155.8700 yen)

(Reporting by Tetsushi Kajimoto; Editing by Sonali Paul)