Consumer prices rose fractionally in May, as Bank of Japan Gov. Haruhiko Kuroda tries to generate inflation with unprecedented monetary stimulus.
Consumer prices excluding fresh food increased 0.1 percent from a year earlier, the statistics bureau said on Friday, versus forecasts by economists for inflation to be unchanged. Unemployment remained at 3.3 percent while household spending eked out a gain for the first time in more than a year.
Growth that is forecast to slow this quarter risks damping inflation that Kuroda predicts will pick up later in the year as the effects of the plunge in oil prices fade. Only 2 of 32 economists see the BOJ reaching its 2 percent target by September next year, with a majority forecasting an eventual increase in stimulus.
“It’s too early for the BOJ to be relieved, even with inflation data that’s a bit stronger,” said Kiichi Murashima, an economist at Citigroup Inc. who accurately forecast the May figure. “Today’s data tell us that Japan’s economy has a tight labor market but it’s not fueling consumer spending.”
Household spending in May increased 4.8 percent from a year earlier, having slumped more than 10 percent in March and dropped 1.3 percent in April.
The price of overseas travel packages and bills for domestic hotel contributed to the rise in consumer prices, Murashima said.
The central bank refrained from boosting its unprecedented stimulus last week, with Kuroda sticking to his view that the underlying trend in consumer prices is upward. Expectations that inflation will pick up have been maintained, even with slower readings in the data, some members of the BOJ’s board said at a May policy meeting.
Oil prices have dropped by more than 40 percent from last year’s peak in June. Cheaper energy could help drive declines in consumer prices of as much as 0.2 percent before inflation picks up again, Takahashi said.
The weak yen — a source of higher import costs — could support inflationary pressures. The currency was at 123.52 against the dollar at 9:31 a.m., after reaching a 13-year low on June 5.
Higher costs of ingredients is leading Kagome Co. to boost prices of its sauces in August, the first increase in a quarter century. Kokuyo Co. cited the weak yen as a reason for its decision to raise the price of its stationery from July.
A Cabinet Office survey released this month showed that 87 percent of households expect the cost of living to increase in the year ahead.
“We have to carefully watch to see if households welcome an increase in prices,” said Atsushi Takeda, an economist at Itochu Corp. “They may still be in saving mode without much wage growth.”