Tokyo’s Inflation Slows in May but Remains above BOJ’s 2% Target

Core consumer inflation in Japan’s capital of Tokyo slowed to 3.2% from a year earlier, according to official statistics released on Friday, but still considerably above the central bank’s target of 2%.

Headline inflation in Japan’s capital, which is viewed as a measure for the nationwide reading, decreased from April’s rate of 3.5% and was lower than economists’ projection of 3.3% in a Reuters poll. 

Excluding the price of fresh food and gasoline, Tokyo’s core-core inflation increased by 3.9%, the highest rate since 1982.  

Japan’s economy has shown signs of improvement after the Covid-19 outbreak, however the future for exports and consumption remains clouded by a global downturn and rising food prices.

Markets are buzzing with talk that the Bank of Japan (BOJ) under new governor Kazuo Ueda may soon begin to wind down its ultra-loose monetary policy, as inflation has already risen over its target.

But Ueda has downplayed the likelihood of any changes to policy in the near future, emphasizing that inflation must consistently achieve the BOJ’s 2% target and be backed by substantial wage growth before the bank will contemplate reducing stimulus.