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© Reuters. A vendor sells chocolates at a shop at the Ameyoko shopping district in Tokyo, Japan, May 20, 2022. REUTERS/Kim Kyung-Hoon/File Photo
By Leika Kihara and Takahiko Wada
In Tokyo (Reuters) -Core inflation in Japan’s capital slowed below the central bank’s 2% target to the lowest rate in nearly two years, data showed on Friday, underscoring policymakers’ view that cost pressures will continue to ease in coming months.
Additionally, separate data showed corporate service inflation holding steady at a nearly nine-year high in December, suggesting that rising service prices were starting to replace increasing costs as the main driver of price gains.
The data follows the BOJ’s signal on Tuesday that it was becoming more convinced it could durably achieve its 2% inflation target, suggesting an end to negative interest rates was nearing.
According to government data, the core consumer price index (CPI) in Tokyo, a leading indicator of nationwide inflation trends, rose 1.6% in January from a year earlier, slower than a median market forecast for a 1.9% gain.
Chief economist Toru Suehiro said, “A lot of food prices rose last January, which probably helped narrow the year-on-year pace of increase this month. Japan might continue to experience a period of dis-inflation.”
The BOJ has pledged to keep ultra-loose policy until the recent inflation, driven by rising costs of raw materials and fuel imports, is replaced by price rises caused by robust domestic demand, accompanied by higher wages.
Minutes of the BOJ’s December meeting released on Friday showed there was no consensus within the nine-member board on the likely timing and sequence of an exit from ultra-loose monetary policy.