By Megumi Fujikawa

TOKYO--Japan's consumer inflation grew at a slower pace in April, but remained above the Bank of Japan's 2% target amid growing expectations over additional interest-rate increases.

Overall consumer prices rose 2.5% from a year earlier in April, compared with the 2.7% increase in March, government data showed Friday.

While the rise in food prices excluding fresh food slowed down in April, the end of the government's utility subsidies is expected to push up consumer prices starting May.

Economists say inflation will likely pick up speed again if the yen remains weak because it means Japanese people have to pay more for imported food and energy.

"We still expect the Bank [of Japan] to deliver one final rate hike at its July meeting," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. But the central bank may not be able to tighten monetary policy much further, he added.

Major Japanese companies have announced large pay increases for this year, and policymakers are hoping that would help the country achieve a virtuous cycle from income to spending. But economists say the weakening yen poses a threat to such a scenario as it delays the recovery of real wages.

Wages adjusted for inflation dropped for 24 consecutive months through March. The Japanese economy contracted in the first quarter of 2024 partly because inflation hit consumers in the pocketbook.

The yen was trading around 157.10 against the dollar in Tokyo on Friday morning, near its three-week low. BOJ Gov. Kazuo Ueda has previously said the central bank would take action if the weak yen starts affecting underlying inflation significantly.

Service prices, one of the key elements to sustainable inflation, rose 1.7% in April, compared with a 2.1% rise in March, Friday's data showed.

Mizuho Securities market economist Ryosuke Katagi said he expects consumer inflation excluding volatile fresh food and energy prices--a measure of underlying inflation--to drop to around the BOJ's 2% target as soon as this summer from a 2.4% increase in April.

Write to Megumi Fujikawa at

(END) Dow Jones Newswires

05-23-24 2258ET