Japan’s Inflation Surge Pressures BOJ Amid Global Trade Risks
Japan's Core inflation accelerated to 3.7% in May, exceeding forecasts and marking over three years above the Bank of Japan's 2% target. The rise, driven by everyday food items rather than volatile components like fuel, saw prices for staples such as rice double since May 2024. Services inflation also edged higher, signaling broadening price pressures.
The BOJ faces a policy dilemma after having ended its stimulus program and raised rates to 0.5% earlier this year. Global trade risks loom large with the potential return of Trump-era tariffs, complicating the central bank's path toward normalization. Export-dependent Japan remains vulnerable to external shocks, forcing policymakers to balance domestic price stability against external headwinds.
