Japan’s Inflation Hits 3.5% as Food Prices Soar and Tariff Risks Loom

Japan’s core inflation rose to 3.5% in April, the highest since early 2023, fueled by rising domestic prices and lingering trade tensions with the U.S.

The increase surpasses forecasts and keeps inflation well above the Bank of Japan’s 2% target, complicating interest rate decisions.

A key driver has been the surge in rice prices, which hit a record 4,268 yen ($28) for a 5kg bag. Despite releasing stockpiles, only 41% of government-auctioned rice has reached wholesalers. Prime Minister Shigeru Ishiba vowed to bring prices below 4,000 yen.

The U.S. is set to impose a 24% reciprocal tariff in July, escalating pressure on Japan’s economy unless a deal is reached. Earlier tariffs on steel, autos, and aluminum continue to weigh on trade.

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Some economists expect inflation to ease with a stronger yen and energy subsidies, but others, like Marcel Thieliant of Capital Economics, believe the BOJ could hike rates in October.

Markets showed muted reaction: the yen ticked up to 143.80, equities rose slightly, and bond yields dipped following the data.

Alexander Stefanov

With over 8 years of experience in the cryptocurrency and blockchain industry, Alexander is a seasoned content creator and market analyst dedicated to making digital assets more accessible and understandable. He specializes in breaking down complex crypto trends, analyzing market movements, and producing insightful content aimed at educating both newcomers and seasoned investors. Alexander has built a reputation for delivering timely and accurate analysis, while keeping a close eye on regulatory developments, emerging technologies, and macroeconomic trends that shape the future of digital finance. His work is rooted in a passion for innovation and a firm belief that widespread education is key to accelerating global crypto adoption.