TOKYO - Japan's core consumer prices in February rose 1.6 percent from a year earlier, climbing less than 2 percent for the first time in nearly four years, government data showed Tuesday, though higher crude oil prices amid the Iran war will add to upward pressure.
The rise of the nationwide consumer price index, excluding volatile fresh food, followed a 2.0 percent increase in January, largely reflecting the government's subsidy program to curb electricity bills from January to March, according to the Ministry of Internal Affairs and Communications.
The inflation rate fell below the Bank of Japan's 2 percent target for the first time since a 0.8 percent rise in March 2022, when sharply lower mobile communications fees held down the rate before the Ukraine war led to surging crude oil and raw material prices in the subsequent months.
Despite the core CPI reading of less than 2 percent, the BOJ is likely to stay on its path of continuing to raise interest rates, analysts said, as the central bank monitors underlying inflation accompanied by strong wage growth rather than the core CPI, which is often affected by one-off factors.
A ministry official said it remains unclear to what extent and when the recent rise in crude oil prices will be seen in the core CPI reading, but added there is a possibility a "wide range" of products and services will be affected.
Since the United States and Israel launched attacks on Iran on Feb. 28, leading to the effective halt of crude oil and other shipments through the Strait of Hormuz, gasoline prices in Japan have hit record highs, while companies have also faced difficulties in procuring heavy oil used for heating and other purposes.
As countermeasures, the government has begun to release oil from stockpiles and resumed gasoline subsidies to mitigate the impact on people's livelihoods.
The Middle East conflict has also driven the U.S. dollar up toward the 160 yen line in a flight to safety, a level last seen in 2024, with the weaker yen adding to import costs for resource-scarce Japan.
In the reported month, energy costs fell 9.1 percent from a year earlier, following a 5.2 percent decline in January, as gasoline prices plunged 14.9 percent thanks to the end of a provisional tax on the fuel in December, while electricity bills decreased 8.0 percent.
The core CPI also benefited from a deceleration of food prices, which climbed 5.7 percent in February, excluding fresh items, down from a 6.2 percent increase in the previous month.
