Japan Inflation Slows More Than Expected in April

Japan’s inflation slowed more than expected in April, government data showed Friday, as Prime Minister Sanae Takaichi considers further measures to drive down costs linked to the Middle East war.

The year-on-year rise in “core” consumer prices, which excludes volatile fresh food, eased to 1.4 percent from 1.8 percent in March. The figure was lower than market expectations of 1.7 percent, but analysts warn inflation will likely pick up in the coming months.

April consumer prices slowed partly thanks to expanded subsidies for high school tuition and a slowdown in price rises of some foods such as rice, according to the internal affairs ministry.

Gasoline prices also fell in April after the government began an emergency subsidy program the previous month, the ministry said.

“Although inflationary pressures eased in April, they will pick up again before long,” said Abhijit Surya of Capital Economics.

Shannon Nicoll of Moody’s Analytics also warned that the “outlook is for higher inflation”.

“Energy price inflation will face renewed pressure in the coming months owing to higher fuel prices. The timing and severity of that pressure will depend on international developments,” he said.

Japan relies on imported oil, much of it from the Middle East, to power the economy.

Takaichi is considering drafting an extra budget to deal with rising prices stemming from the Middle East conflict that has squeezed flows of oil from the region.

The budget could be worth around three trillion yen, Kyodo News said, citing an unnamed source.

The conservative leader has so far refrained from discussing its expected size, only saying that she was considering taking steps before the rising price pressure spins out ofcontrol.

“I would like to consider a supplementary budget bill designed primarily to address the current situation in the Middle East and related issues, in case we are unable to respond (effectively),” Takaichi told the legislature on Wednesday.