US EditionJapan’s core inflation hits highest level since January 2023, putting pressure on BOJ to raise rates
- Japan's core inflation rose to 3.7% in May 2025, marking the fastest annual pace since January 2023 and surpassing market expectations.
- This inflation increase follows persistent wage growth, labor shortages, and a 2024 decision by the Bank of Japan to start unwinding its ultra-loose monetary policy.
- Food prices, especially rice which nearly doubled, drove inflation alongside a 2.2% rise in services inflation and companies planning price increases in nearly 2,000 items in June.
- Governor Kazuo Ueda stated last month that the BOJ policy rate remains below neutral levels, leaving room for multiple rate hikes, while market expectations push government bond yields and the yen higher.
- Increasing inflationary pressures driven by rising wages indicate that the Bank of Japan could begin tightening monetary policy before early 2026, highlighting vulnerabilities in Japan’s delicate economy amid persistent supply shortages.
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BOJ’s fresh take on labor crunch opens door for more rate hikes | The Asahi Shimbun Asia & Japan Watch
The Bank of Japan is increasingly blaming chronic labor shortages, not stagnant demand, as the main reason for its weak economic activity, a justification it may use to lift interest rates beyond what was initially expected.
·Tokyo, Japan
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Coverage Details
Total News Sources24
Leaning Left4Leaning Right1Center6Last UpdatedBias Distribution55% Center
Bias Distribution
- 55% of the sources are Center
55% Center
L 36%
C 55%
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