BOJ’s new trend gauge shows inflation exceeding target

By Leika Kihara

TOKYO, May 26 (Reuters) – Japan’s core consumer inflation rate excluding one-off factors, as measured by the central bank’s new gauge, hit 2.8% in April, exceeding its 2% target and accelerating from 2.5% in March, the Bank of Japan said on Tuesday.

The new index, which strips out institutional factors such as education and energy-related subsidies, showed a much faster year-on-year rise than the 1.4% rate in the benchmark core consumer price index figure the government announced last week.

The BOJ began disclosing the data from March to enhance communication on underlying inflation, seen as crucial to its rate-hike decisions.

The reading for April may help the BOJ make the case to raise interest rates next month by showing how inflation remained above its target when excluding the effect of government subsidies, analysts say.

The government has introduced various temporary subsidies to cushion the economic blow from rising living costs, which has weighed on inflation and made it more difficult for policymakers to gauge the broader price trend.