Japan inflation slows but Mideast war could spark new rise

TOKYO

Japan's core inflation slowed to 1.6 percent in February, government data showed on Tuedsay, although it could soon rise again as the Middle East war sparks surges in oil prices.

The year-on-year rise in consumer prices, which excludes fresh food, eased from 2 percent in January and was a bigger drop than expected partly thanks to government energy subsidies.

It was the lowest figure since March 2022.

Prime Minister Sanae Takaichi has promised to fight inflation as a major priority.

Public discontent over inflation  in particular the doubling of rice prices last year — largely contributed to the downfall of her predecessor Shigeru Ishiba.

Rice prices rose again in February but at 16.6 percent, a far lower pace than in previous months.

Overall, consumer price growth including fresh food eased to 1.3 percent in February from 1.5 percent in January, with market consensus pegged at 1.5 percent.

However, Japan's central bank warned last week that it expected inflation to increase because of the "recent rise in crude oil prices" caused by the Middle East war.

Japan depends on the Middle East for 95 percent of its oil imports. The government began an emergency subsidy program to drive down the cost of gasoline.

It is hoped the gasoline subsidies will help bring petrol prices to around 170 yen ($1.06) per litre, Chief Cabinet Secretary and top government spokesman Minoru Kihara has said.

The average gasoline price in Japan was hovering just below 160 yen per litre before the war began. 

Government officials expect it could take up to two weeks for the gas prices to come down to the target level.