By Leika Kihara
TOKYO, May 22 (Reuters) – Japan’s core consumer prices rose 1.4% in April from a year earlier, data showed on Friday, marking the slowest annual pace in four years due largely to the effect of government subsidies on school tuition.
But analysts expect inflation to accelerate in coming months, as elevated oil costs and supply disruptions caused by the Middle East conflict prod firms to raise prices for a broad range of products.
The increase in the core consumer price index (CPI), which strips away the effect of volatile fresh food costs, compared with a median market forecast for a 1.7% gain. It followed a 1.8% rise in March and was the slowest year-on-year increase since March 2022.
A separate index excluding the effect of volatile fresh food and fuel, which is closely watched by the Bank of Japan as a better gauge of demand-driven price moves, rose 1.9% in April from a year earlier after a 2.4% gain in March.
The data is among factors the BOJ will scrutinise at next month’s policy meeting, where the board is widely expected to raise its short-term policy rate to 1% from 0.75%.
Markets have been rattled after the Iran war effectively shut the Strait of Hormuz, a chokepoint for about a fifth of global oil and gas flows, driving up crude oil prices and the safe-haven dollar against the yen.
The war has complicated the BOJ’s rate-hike plan by adding to inflationary pressure, while weighing on an economy heavily reliant on fuel imports from the Middle East.
Wholesale inflation, a leading indicator of consumer prices, accelerated in April at the fastest pace in three years as the Iran war boosted oil and chemical goods prices, bolstering the case for a near-term rate hike.
(Reporting by Leika Kihara; Editing by Sam Holmes)
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