By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week.
The preliminary GDP data for the January-March quarter released last week showed the economy has overcome a temporary contraction recorded in July-September last year, thanks to rebounds in net exports and public works as well as sluggish but resilient private consumption and a modest gain in business investment in digitization.
This week, consumer inflation in Tokyo, a leading indicator of the national trend, is expected to remain tame in May, staying below the Bank of Japan’s 2% target in all three key measures, as the government is trying to mitigate the impact of rising energy costs with subsidies. The unemployment rate is also seen low and steady at 2.7% in April while the pace of job creation has slowed in recent months. Depressed real wages for a majority of employees are expected to have led to sluggish retail sales.
Government policymakers may be underestimating the shortages of naphtha and other raw materials that are key to business and consumer spending. In April data, the effective blockade of the Strait of Hormuz by Washinton and Tehran is forecast to have continued to dampen factory output by squeezing the availability of naphtha, the crucial raw material for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
Tuesday, May 26
1400 JST (0500 GMT/0100 EDT Tuesday, May 26) The Bank of Japan releases its own core CPI measures including the one that is designed to strip off the effects of fiscal measures (utility and fuel costs have been capped by subsidies) and other one-off factors like mobile phone charge discounts. It reflects the board’s hope to keep inflation expectations around 2% alive that would allow the bank to continue raising interest rates gradually as part of its policy normalization.
The latest government data released last week showed that Japan’s consumer inflation moderated at a faster pace than expected in April as processed food price markups continued easing after domestic rice shortages were resolved last year and free private high school education took effect at the start of fiscal 2026. These factors overwhelmed the effect of a smaller drop in overall energy costs that was caused by the phaseout of three-month electricity and gas heating subsidies.
The year-on-year increase in the core CPI (excluding fresh food) slowed sharply to 1.4% after unexpectedly accelerating to 1.8% in Mach from 1.6% in February. In March, the Iran war drove the national average retail gasoline price to a record high in mid-month, just before renewed subsidies took effect to cap fuel price markups. The core rate remains the slowest since +0.8% seen in March 2022.
The annual rate of the total CPI also eased to 1.4% in April after rising to 1.5% from 1.3%, also the smallest gain since March 2022, when it was 1.2%. A month later the total CPI rate jumped to 2.5% and the core CPI to 2.1% as the world was hit by the full impact of Russia’s invasion of Ukraine that triggered a surge in energy and commodities prices amid supply disruption concerns.
Tuesday, May 26
TBA – The Cabinet Office releases the government’s monthly economic report for May. The April report was released shortly after 1735 JST (0835 GMT/0435 EDT) when economic ministers ended their brief monthly meeting.
Last month, the government continued to expect a gradual economic recovery, backed by strong demand for investment in artificial intelligence, while Tokyo stock markets kept flirting with record highs on hopes of an end to the Iran war that would allow reopening of the Strait of Hormuz, crucial for oil and gas exports from the Mideast Gulf states.
But cabinet ministers also repeated their warning about elevated costs for energy and tighter supply of refined petroleum products, particularly naphtha, the source for ethylene, propylene and benzene among others. These petrochemicals are essential for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
In the April report, the government maintained its core assessment, saying that the economy is “recovering at a moderate pace but the impact of the situation in the Middle East needs a close attention.”
Friday, May 29
0830 JST (2330 GMT/1930 EDT Thursday, May 28) The Ministry of Internal Affairs and Communications releases May Tokyo CPI.
Mace News median: total CPI +1.6% y/y (range: +1.5% to +1.7%) vs. April +1.5%; core CPI (ex-fresh food) +1.5% (range: +1.4% to +1.7%) vs. April +1.5%; core-core CPI (ex-fresh food, energy) +1.9% (range: +1.6% to +2.0%) vs. April +1.9%
Consumer inflation in Tokyo, a leading indicator of the national trend, is expected to be mostly steady in May, staying below the Bank of Japan’s 2% target in all three key measures, as fuel subsidies that were renewed in late March have capped gasoline prices while free daycare services in the Tokyo metropolitan area that took effect last year and had a full impact in April also helped. Overall energy costs showed a smaller dip after the phaseout of three-month electricity and gas heating subsidies that ended in March.
The core measure (excluding fresh food) is forecast to show a 1.5% rise on year after the annual rate eased to a four-year low of 1.5% in April from 1.7% in March, well below the recent peak of 3.6% hit in May 2025 when processed food price hikes were sharp in the aftermath of domestic rice shortages. The annual rate of the total CPI is expected to edge up to 1.6% from 1.5% in April and 1.4% in March. The year-on-year increase in the core-core CPI (excluding fresh food and energy) is seen steady at 1.9% after moderating to the rate in April from 2.3% in March.
At its last meeting on April 27-28, the Bank of Japan’s nine-member board decided in a 6 to 3 vote to leave the target for the overnight interest at 0.75% after leaving it unchanged in an 8 to 1 vote at its previous meetings in March and January and conducting its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high in a unanimous vote.
The bank pointed to upside risks to inflation, given that underlying CPI inflation is approaching the bank’s 2% target and firms’ behavior is shifting more toward raising wages and prices.
In its quarterly Outlook Report issued after the meeting, the bank brought forward the timing of hitting the 2% inflation target, saying “between the second half of fiscal 2026 and fiscal 2027,” underlying CPI inflation and the rate of increase in the core CPI (excluding fresh food) should increase gradually and will be “at a level that is generally consistent with the price stability target.” For years, the bank continued to peg the timing to “the second half of its projection period” (in this case, from fiscal 2026 through fiscal 2028).
Friday, May 29
0830 JST (2330 GMT/1930 EDT Thursday, May 28) The Ministry of Internal Affairs and Communications releases the April unemployment rate.
Mace News median: 2.7% (range: 2.6% to 2.7%) vs. 2.7% in March, 2.6% in February, an 18-month high of 2.7% in January, a 5-month low of 2.4% in July, 2.5% from March to June 2025
It is well below the rates in other major economies as labor shortages continue in the sectors with long work hours and lower pay, notably daycare, medical, transport and construction. Last year, unemployment was stuck at 2.6% from September to December after rising to the level in August from a five-month low of 2.4% in July.
Payrolls likely posted a third straight rise after marking a rare year-on-year drop in January. The increase has been led by gains in both regular and non-regular positions, after the total number of employed unexpectedly posted its first year-on-year drop in 42 months in January for one-off factors. In March, the number of employed posted a modest 30,000 rise on year, led by hotels, restaurants and telecommunications firms while manufacturers, construction firms and medical service providers trimmed workers.
The government continues to describe employment conditions as “showing signs of improvement” in its latest monthly economic report for April, unchanged since the last upgrade for the category in June 2023.
Friday, May 29
0850 JST (2350 GMT/1950 EDT Thursday, May 28) The Ministry of Economy, Trade and Industry releases preliminary April industrial output, the outlook for May, June.
Mace News median: –1.0% m/m (range: -2.2% to +0.4%) vs. March revised up to -0.4% from -0.5%; +0.6% y/y (range: -0.5% to +2.3%) vs. March revised up to +2.4% from +2.3%
The effective blockade of the Strait of Hormuz by Washinton and Tehran is expected to have continued to dampen factory output in Japan in April by squeezing the availability of naphtha, the crucial raw material for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
Industrial production is forecast to post a 1.0% drop on the month in April for a third straight drop after slipping a revised 0.4% in March.
Last month, the monthly survey by the Ministry of Economy, Trade and Industry indicated that output would remain depressed, down 0.7% on the month in April after adjusted for the data’s upward bias, as the Iran war impact lingers and despite plans to raise output of computer chips and vehicles. The METI projected that production would rebound 2.2% in May.
In the March report, the ministry maintained its assessment that industrial output was “taking one step forward and one step back.” The last change was made in the July 2024 report, when it upgraded its view.
Friday, May 29
0850 JST (2350 GMT/1950 EDT Thursday, May 28) The Ministry of Economy, Trade and Industry releases preliminary April retail sales.
Mace News median: +1.7% y/y (range: +0.2% to +3.1%) vs. March revised down to +1.4% from +1.7%; +1.3% m/m (range: -0.8% to +1.4%) vs. March revised down to +1.0% from +1.3%
Japanese retail sales are forecast to post a modest 1.7% rise on year in April after a downwardly revised 1.4% gain in March, thanks to solid demand for clothing and luxury goods at department stores, the recent pickup in vehicle purchases and continued strong drugs/cosmetics sales, offsetting the effects of falling fuel prices caused by subsides aimed at alleviating the drag from the Mideast conflict.
Last month, the Ministry of Economy, Trade and Industry maintained its assessment after upgrading it in the January report, saying retail sales are “on a gradual uptrend.” This view is unlikely to be changed in the April report.
Friday, May 29
1400 JST (0500 GMT/0100 EDT Thursday, May 28) The Cabinet Office releases the May Consumer Confidence Survey.