Investing.com-- Japan consumer price index (CPI) inflation rose as expected in February, rising well above the Bank of Japan’s annual target rate and giving more credence to the central bank’s recent policy shift.
Core CPI inflation, which excludes volatile fresh food prices, grew an annualized 2.8% in Feb, official data showed on Friday. The reading was in line with expectations and picked up sharply from the 2% seen in the prior month- where it had fallen to the BOJ's 2% annual target for the first time since early-2022.
A core CPI reading that excludes both fresh food and energy prices, and is seen as a key indicator of underlying inflation by the BOJ, rose 3.2% in Feb, easing from the 3.5% seen in the prior month and coming further away from 40-year highs hit in 2023.
Headline CPI inflation rose 2.8% from the 2.2% seen in the prior month.
Food price inflation remained a key driver of prices, while spending on recreational goods and services also picked up slightly from the prior month.
CPI comes just after BOJ policy shift
Friday’s reading comes just days after the Bank of Japan hiked interest rates for the first time in 17 years, and also ended its yield curve control programs. The move marked a historic shift away from nearly a decade of ultra-dovish monetary policy.
The BOJ forecast an uptick in inflation over the coming months, driven chiefly by increased private consumption following a bumper hike in wages this year.
Negotiations between major labor unions and employers showed that Japanese workers won strong wage hikes for 2024- a trend that is likely to push up inflation in the coming months.
The Japanese economy is also expected to see a renewed boost from higher consumption this year, after barely dodging a technical recession in the fourth quarter of 2023.