Japanese inflation beat expectations in April

Japanese inflation data for April is out, and it’s a slight beat.

Core CPI, that which excludes fresh food prices, increased by 0.3% in the 12 months to April, beating expectations for an increase of 0.2%.

In a sign that the national CPI is likely to remain positive territory when the May figures are released next month, core consumer prices in Tokyo rose 0.2% in May, once again ahead of forecasts for an increase of 0.1%.

The data beat expectations across the board. But as the chart below shows, when you strip out the sales tax increase of April 2014 that temporarily boosted prices, inflationary pressures remain subdued considering the aggressive monetary policy settings and the accompanying weakness in the Yen.

There have been some encouraging signs for Japan’s economy in recent weeks – GDP smashed expectations in the March quarter and manufacturing activity expanded solidly in May – should inflation not accelerate in the coming months there remains a strong possibility that the Bank of Japan will expand its aggressive monetary expansion in the second half of the year.

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