Tokyo's headline measure of core consumer prices - which excludes volatile fresh food - rose 1.5% year-on-year in April, figures released on Friday showed, keeping inflation short of the central bank's 2% objective for a third straight month. The April outcome followed a 1.7% gain in March and fell below a median market forecast of a 1.8% increase.
An alternative gauge that strips out both fresh food and fuel - a series closely monitored by the Bank of Japan as a clearer indicator of underlying price momentum - climbed 1.9% in April after a 2.3% advance in March. Policymakers have flagged that measure in assessing whether inflationary pressures are becoming more entrenched.
Authorities have kept fuel subsidies in place, which helped blunt the impact of rising raw material costs associated with the conflict in the Middle East. Those measures contributed to the softer-than-expected headline reading even as commodity-driven price pressures intensified.
Market observers and analysts expect consumer price growth to pick up again in the months ahead. They point to recent sharp rises in oil prices and the inflationary effect of higher import costs linked to a weak yen - factors that could lift consumer inflation and complicate the Bank of Japan's policy outlook.
The BOJ left interest rates unchanged at its most recent meeting on Tuesday, but officials removed strong signals that a rate increase could come as early as June, citing mounting inflationary pressures. The bank had begun to roll back its extraordinary stimulus in 2024 and has implemented several rate increases since then, including a move in December that took its short-term policy rate to 0.75% on the assessment that Japan was nearing a durable 2% inflation rate.
Yet the relatively gradual pace of tightening has been criticized for keeping the yen weak, which in turn raises import prices and adds to inflationary risks. Those dynamics - together with higher fuel costs stemming from the U.S.-Israeli war with Iran - have complicated the BOJ's decisions by exerting added upward pressure on prices for an economy that depends heavily on oil imports from the region.
Summary: Tokyo's core CPI excluding fresh food eased to 1.5% in April, below the BOJ's 2% target for the third month running. The BOJ held rates steady and removed strong signs of an imminent June hike. Fuel subsidies and a weak yen remain key factors shaping inflation and policy considerations.