Tokyo’s Feb Inflation Slows for First Time in Years as Subsidies Kick In

Tokyo’s consumer prices dropped for the first time in over a year in February as the effect of government energy subsidies kicked in, but an index excluding the cost of gasoline hit a new 30-year high, indicating that inflationary pressures are building in Japan.

Excluding food and beverages, consumer prices in Tokyo climbed 3.3% in February, in line with market expectations and down from January’s nearly 42-year high of 4.3%, official data showed on Friday.

For nine consecutive months, Tokyo’s core consumer price index (CPI) increased by more than the BOJ’s 2% target.

Data showed that the slowdown was mostly driven by the impact of government energy subsidies on taming rising power rates.

Since the Tokyo number is a predictor of national data, the sharp slowdown shows that the country’s price growth may have peaked in January as the full impact of subsidies took effect.

Separate data revealed that Japan’s unemployment rate hit a three-year low of 2.4% in January, suggesting that worsening labor shortages may prompt employers to raise wages and help alleviate the burden of rising expenses of living for consumers.