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Tokyo’s consumer inflation surged in April, reinforcing expectations that the Bank of Japan (BoJ) may raise interest rates sooner than anticipated. According to ING analysts, a sharper-than-expected rise in Tokyo’s core inflation has increased the chances of a BoJ rate hike as early as June.
Core consumer prices in Tokyo rose 3.4% year-on-year, up from 2.4% in March and exceeding the 3.2% consensus forecast. The overall consumer price index climbed 3.5%, signaling broad-based inflation, particularly in services and housing. The April data suggests that inflation may finally be reaching the sustainable levels the BoJ has long aimed for.
ING highlighted that this surge was partly due to more pronounced seasonal price hikes and resilient service-sector inflation. Despite a decline in fresh food prices, gains in education costs and housing signal persistent upward price pressures. Coupled with solid wage growth projected for the year, the inflation outlook appears robust.
While the BoJ is likely to hold interest rates steady at its upcoming May 1 meeting, due to uncertainty around U.S. trade and tariff policies, the prospect of a policy shift in the summer remains strong. ING maintains its base case for a July rate hike but notes that the probability of a June move is growing.
A potential rate hike would support yen appreciation, a move that could ease U.S. criticism of Japan’s weak currency. ING analysts believe the BoJ will act when external risks become clearer, enabling it to normalize policy without fueling international tensions.
The latest inflation print underscores the BoJ’s shift away from ultra-loose policy, signaling a new phase for Japan’s monetary stance amid rising price stability.
