An inflation gauge closely watched by the Bank of Japan accelerated at its fastest pace in almost three years as some retailers passed on rising costs to households, a positive sign for the central bank as it seeks to stoke consumer prices. But the big part of the increase came from a spike in package tour fees ahead of Japan's 10-day holiday in May, casting doubt over the long-term sustainability of the improvement as escalating trade tensions weigh on the outlook for the export-reliant economy.
Core consumer prices rose 0.9% in April from a year earlier, matching a median market forecast and accelerating slightly from the previous month's 0.8% gain, government data showed on Friday. The so-called core-core CPI, which strips away the effects of volatile food and energy costs and is the main policy focus for the BoJ, rose 0.6% in April, marking the biggest increase since June 2016, the data showed.
"Some companies appear to have translated rising costs to households. But wage growth is slow and consumers remain sensitive to price hikes, so it's doubtful whether such a move will broaden," said Takeshi Minami, chief economist at Norinchukin Research Institute. The BoJ hopes that continued strength in the economy will prompt companies to raise wages and give consumers more purchasing power, thereby helping accelerate inflation.
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