Japan Viewpoint: Oil shock: Pipeline pressures set to lift CPI from autumn

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Japan Viewpoint: Oil shock: Pipeline pressures set to lift CPI from autumn

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Japan Viewpoint

Oil shock: Pipeline pressures set to lift CPI

from autumn

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Higher oil prices to lift inflation, tilt the BoJ more hawkish 08 June 2026

Oil prices have risen on Middle East tensions. Higher import prices feed into producer Economics

prices and, with a lag, into CPI. The Bank of Japan (BoJ) has kept a hawkish tone on Japan

upside inflation risks. If these risks materialize, further hawkish shifts in the policy Takayasu Kudo

stance will become more likely. Japan Economist

BofAS Japan

Oil-price shock passes through to CPI over about a year +81takayasu.kudo@bofa.com3 6225 8592

The transmission runs through three channels: gasoline, electricity, and non-energy Izumi Devalier

items. Gasoline adjusts quickly. Electricity follows with a lag of around six months under JapanBofASEconomistJapan

the fuel cost adjustment rule. Pass-through to non-energy items builds more gradually +81 3 6225 6257

izumi.devalier@bofa.com

and peaks after about a year. The pattern matches the 2022–23 episode after the

Ukraine shock.

CPI = Consumer Price Index

Inflation likely to rise back above 3% in early 2027

In the near term, subsidies restrain energy CPI. Together with unfavorable base effects PPI = Producer Price Index

in food, headline CPI yoy should decelerate through the summer. At the same time, cost

Japan core CPI = Headline CPIpressures continue to spread into non-energy items. Core CPI, now below 2%, is likely to

excluding fresh foodrise back above 3% in early 2027.

BoJ core CPI = Headline CPI excluding

Upside risks: faster pass-through, more active price fresh food and energy

setting

Risks around this reacceleration are tilted to the upside. Naphtha and other