Inflation Slows To 2.6% In March, Eyes Are Now On The Bank Of Japan

(CTN News) – Government data showed on Friday that Japan’s core inflation slowed in March due to mild increases in food prices while remaining comfortably above the central bank’s target of 2%, according to government figures.

According to the National Consumer Price Index (CPI), which excludes fresh food items from its calculations, the consumer price index (CPI) for March rose 2.6% from a year earlier, following a 2.8% rise in February. The company met the median market forecast for the quarter.

It was found that the “core core” index, which excludes both fresh food and energy costs, rose 2.9% following a 3.2% rise in February. This index is closely monitored by the Bank of Japan as a gauge of broader inflation trends and is closely watched by the government. As a result, the index fell below 3% for the first time since November 2022, when it fell below the 3% threshold.

Market participants are looking for clues as to when the central bank might raise interest rates again after it ended negative rates last month in a historic shift away from its decade-long super-easy monetary policy in a historic move.

A virtuous cycle of sustained, stable achievement of the BOJ’s 2% price target along with a strong wage growth is considered crucial for the normalization of monetary policy, according to the BOJ.

Despite the fact that Japanese companies have raised their wages for the first time in 33 years this year, the inflation-adjusted real wages of Japanese workers have been declining for nearly two years.

There are some analysts who believe a lackluster domestic demand will lead to inflation falling below the BOJ’s 2% inflation target by the end of this year, complicating the decision the BOJ must make.

As the yen weakens, it pushes up import prices, which, in turn, exacerbates households’ purchasing power and weighs down their consumption at a time when households are struggling.

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