Tokyo Inflation Surge Spurs Rate Hike Speculation

Tokyo's core consumer prices rose 3.4% year-on-year in April, exceeding expectations and marking the fastest increase since July 2023, driven by broad-based price hikes and a reduction in government subsidies. The headline inflation rate reached 3.5%, and an index excluding both fresh food and fuel also climbed, indicating persistent underlying inflation. The sharp rise in inflation has increased the likelihood of a Bank of Japan interest rate hike as early as June, though the BoJ is expected to keep rates steady at its upcoming meeting. Any policy tightening later in the summer may strengthen the yen. Meanwhile, India's private sector activity reached an eight-month high in April, supported by robust domestic demand despite global economic headwinds and a modest IMF downgrade in growth forecasts. Both Japanese and Indian economies are contending with inflationary pressures and shifting global trade conditions.