Japan's core inflation climbs to 3.5%, highest in more than 2 years
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TOPSHOT – Customers enter an electronics shop in the Akihabara district of Tokyo on January 12, 2024. 

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Japan’s core inflation accelerated to 3.5% in April, government data showed on Friday, bolstered in part by surging rice prices, as the central bank considers pausing its rate hike posture to assess the impact of U.S. tariffs.

The core inflation figure, which strips out prices for fresh food, was higher than expectations of 3.4%, according to economists polled by Reuters, marking the highest level since January 2023.

Headline inflation climbed 3.6% from a year ago, steady from the prior month and staying above the Bank of Japan’s 2% target for more than three years.

Bank of Japan Governor Kazuo Ueda has signaled his stance on intending to raise rates given price trends, while also citing the need to monitor closely the effects of U.S. tariffs.

Japan has been grappling with soaring rice prices in recent weeks. The average price in 1,000 supermarkets across the country reportedly continued to hit record highs, with prices for a 5-kilogram bag of rice hiking by 54 yen from the previous week to 4,268 yen ($29.63) as of May 11.

The core inflation is expected to ease in the coming months due to lower crude oil prices and the yen’s appreciation, said Masato Koike, economist at Sompo Institute Plus.

As seen during Trump’s first administration, an oversupply of food stemming from the U.S. tariffs could lead to lower food prices, said Koike, adding that the resumption of government subsidies for electricity and gas bills in the summer will also create downward pressure on inflation.

The Japanese yen strengthened 0.15% to 143.80 against the U.S. dollar following the release.

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