-- Tokyo inflation lost momentum again, underscoring the Bank of Japan's dilemma as price pressures build unevenly. Core consumer prices in the capital rose 1.5% in April, the slowest pace in four years and below the central bank's 2% target for a third straight month.
The reading marked a fifth consecutive slowdown and came in under market expectations. A narrower gauge that strips out both fresh food and energy, which is also closely watched by policymakers, increased 1.9%, also easing from the prior month.
The softer print partly reflects government fuel subsidies and one-off factors such as a sharp drop in nursery school fees, alongside moderating gains in durable goods and processed food. Energy prices continued to decline, though at a slower pace.
Still, the calm may not last. Rising oil prices tied to the Middle East conflict and a weaker yen are expected to push up import costs in the months ahead.
The outlook is already complicating policy decisions.
The BOJ kept rates unchanged this week in a split decision, even as some officials leaned toward tightening. Governor Kazuo Ueda signaled flexibility, leaving room to wait as risks to growth intensify.
Currency moves add another layer. Authorities stepped into the foreign exchange market to support the yen after it slid near 160 per dollar, highlighting concern that prolonged weakness could further inflate import bills.
"We expect the BOJ to guard against an inflation overshoot. That strengthens the case for a 25-basis-point hike in June, but the latest reading suggests it's far from certain," said Bloomberg economist Taro Kimura.
"The central bank is also watching uncertainty around the Iran war and the government's willingness to support growth amid a crude oil squeeze."