Japan PPI inflation slips to 11-mth low in July
Investing.com-- A sharper-than-expected rise in Tokyo’s consumer prices has boosted the likelihood of a Bank of Japan (BoJ) interest rate hike as early as June, ING analysts said in a note.
Tokyo’s core inflation climbed to 3.4% year-on-year in April, up from 2.4% in March and above the 3.2% market consensus, driven by broad-based price gains in services and housing. Overall CPI rose 3.5%, also surpassing expectations.
"With solid wage growth expected this year, it appears that the sustainable inflation the Bank of Japan hoped for has finally arrived," ING analysts said, adding that April’s seasonal price hikes were more pronounced than usual.
A rebound in education prices and persistent services inflation suggest sustained pressure, despite a sharp easing in fresh food prices, analysts noted.
While the BoJ is widely expected to keep rates unchanged at its upcoming policy meeting on May 1 due to lingering U.S. trade policy uncertainty, ING maintains its base case for a July rate hike.
Analysts flagged that the odds of a June move are rising.
Uncertainty over U.S. trade policy and tariffs complicates the timing, but ING expects the BoJ to tighten policy this summer, allowing yen appreciation to counter U.S. criticism of the currency’s weakness.
"We believe that the BoJ will tighten when things become clearer, which will see the JPY appreciating further," analysts added.