Key insights
- Tokyo's April inflation slowed more than expected, with the BOJ's core measure falling to 1.9%. Barclays attributes this largely to childcare subsidies rather than underlying economic weakness. While seemingly localized, persistent disinflation in major economies can influence global monetary policy expectations, indirectly impacting US equities. The effect is slightly bearish as it reinforces the global trend of moderating inflation.
Investing.com -- Tokyo's April inflation data showed a sharper-than-expected slowdown in the Bank of Japan's preferred core measure, declining to 1.9% year-over-year from 2.3% in March, according to a Barclays economic update released Friday.
The reading, which excludes perishables and energy, fell short of market expectations of 2.2%, marking the second consecutive monthly deceleration.
The slowdown was largely attributed to Tokyo's free childcare program for first children, which began in September 2025 and expanded into the new fiscal year. The nursery school insurance premiums index dropped to 0.0, resulting in a 100.0% year-over-year decline and a significant negative contribution to the overall figure.
Additional factors contributing to the deceleration included overseas travel packages, which fell 2.1% in April compared to a 5.1% increase in March, and cat food prices, which dropped 3.6% after rising 23.3% the previous month. Entertainment costs rose 1.1%, down from 1.3% in March, while food excluding perishables increased 4.6%, compared to 4.9% previously.
The broader CPI excluding perishables showed a more moderate decline to 1.5% from 1.7%, primarily due to reduced subsidies for electricity and gas bills. Overall CPI inflation rose to 1.5% from 1.4%, driven by a larger contribution from perishable goods. Both readings came in below market expectations.
Barclays noted the sharp drop in the Bank of Japan's core inflation measure was largely due to institutional factors rather than underlying economic trends.