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Tokyo inflation spikes

Core inflation in Tokyo surged to a two-year high, driven by rising food costs, putting pressure on the Bank of Japan to consider further rate hikes. Asian stocks traded mostly lower on Friday, with Japan’s Nikkei 225 down. Meanwhile, US stocks rose somewhat on Thursday despite a legal battle over tariffs and data showing a contraction in US GDP for the first quarter.

  • Date
  • Author Shane Strowmatt, LGT
  • Reading time 5 minutes

Japan economy
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Core inflation in Tokyo surged to a two-year high, with the core CPI rising 3.6% year-on-year in May, surpassing market expectations. This increase, driven by persistent food cost rises, keeps pressure on the Bank of Japan to consider further rate hikes. Meanwhile, factory output fell by 0.9% in April, reflecting the impact of slowing global demand and US tariffs, complicating the BOJ's decision-making. Services inflation also rose, indicating companies are passing on higher labour costs. On Friday, Japan’s Nikkei 225 was trading 0.9% lower.

Asian stocks mostly lower

Stocks elsewhere in the Asia-Pacific region were trading lower on Friday, with the exception of Australia’s S&P/ASX 200, which gained 0.3% after Australian retail sales declined by 0.1% in April. That contrasts with expectations of a 0.3% rise. The data suggests a cautious consumer sentiment, despite lower borrowing costs and cooling inflation, and may prompt further interest rate cuts by the Reserve Bank of Australia in July. Meanwhile, Korea’s Kospi fell 0.8% after the Bank of Korea lowered its policy interest rate by 25 basis points to 2.5% on Wednesday, marking its fourth reduction in the current easing cycle. The central bank also reduced its GDP forecast for 2025 to 0.8%, down from 1.5%, citing expectations of significant economic growth decline while maintaining stable inflation. Hong Kong’s Hang Seng Index slipped 1.4%, and mainland China’s CSI 300 was down 0.2%.

US stocks rise amid court dispute on tariffs

The Dow Jones Industrial Average increased by 0.3% to 42,215.73 points on Thursday, recovering from mid-week losses. The S&P 500 gained 0.4% to finish at 5912.17 points. The Nasdaq-100 also edged higher, adding 0.2% to close at 21,363.95 points. A legal battle over the legitimacy of import tariffs, initially blocked by the US Court of International Trade, did not deter investors. The appellate court temporarily lifted the injunction, allowing most of President Donald Trump's tariffs to remain in effect while the case is reviewed. Nvidia shares climbed 3% due to positive quarterly results, while Boeing rose 3.3% on production increase news. Conversely, Salesforce dropped 3.3% due to concerns over its cloud business, and HP Inc. fell 8.3% after lowering its profit forecast.

US GDP contracts in first quarter

Markets were also little affected by data released Thursday showing that US gross domestic product (GDP) decreased at an annual rate of 0.2% in the first quarter of 2025. The GDP second estimate released by the Bureau of Economic Analysis follows a 2.4% increase in the fourth quarter of 2024. The decline was primarily due to higher imports and reduced government spending, partially offset by increased investment, consumer spending, and exports. Corporate profits fell by USD 118.1 billion, contrasting with a USD 204.7 billion increase in the previous quarter.

Corporate and economic calendar

Corporate news in focus: Annual general meeting at Lowe's.

Economic data in focus: German retail sales (08:00), German Consumer Price Index (14:00), US personal consumption expenditures (14:30), University of Michigan Consumer Sentiment Index (16:00).

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