Japan's core inflation rate remained stable in May at 1.4%, in line with analysts' expectations and unchanged from the previous month.
Core inflation refers to the inflation rate that does not take into account the often volatile prices of fresh food. The data showed that overall price pressures remained under control despite concerns about rising energy costs.
At the same time, the overall inflation rate rose slightly to 1.5% from 1.4% in April. Meanwhile, a more stringent measure of inflation, which excludes fresh food and energy prices, fell to 1.8% from 1.9% previously.
The development suggests that underlying inflation pressures in Japan have yet to rise significantly.
After the data was released, the Japanese stock market showed a positive reaction with the Nikkei 225 index recording an increase. The yield on 10-year Japanese government bonds also rose, reflecting expectations that interest rates may remain high for some time.
Although inflation remains below the Bank of Japan's (BOJ) 2% target, the central bank continues to monitor the risk of price increases stemming from energy costs.
Energy prices fell by an annual rate of 2.5% in May, but the rate of decline was smaller than the 3.9% in April. This indicates that energy costs are still at high levels.
In addition, companies in Japan are also facing increasing cost pressures. The producer price index, which measures the costs borne by businesses, rose 6.3% in May, the fastest rate of increase in more than three years.
Rising crude oil prices are among the main factors contributing to the increase in costs.
At the same time, the weak yen against the US dollar is also a challenge for Japan. A weak yen makes imports more expensive, especially for energy that is largely purchased in dollars.
This situation could increase inflationary pressures in the future, especially as geopolitical uncertainties and global energy prices remain a concern.
