Investing.com-- Japanese consumer price index inflation grew as expected in March, while core inflation accelerated due to a persistent increase in food prices, complicating the Bank of Japan’s rate outlook amid U.S. tariff tensions.
National CPI grew 3.6% year-on-year in March, in line with expectations, cooling slightly from the prior month’s reading of 3.7%, government data showed on Friday.
Core CPI, which excludes fresh food prices, grew 3.2% y-o-y, matching estimates, but above the 3.0% rise seen in February.
A core reading that excludes both fresh food and energy prices also rose 2.9% in March from 2.6% in the prior month. The reading is closely watched as a gauge of underlying inflation by the BOJ, and it remained well above the central bank’s 2% annual CPI target.
Friday’s CPI print showed that Japanese inflation remained largely sticky amid rising food costs and expectations of higher wages.
ING analysts moved their rate hike forecast from May to July and expect the Bank of Japan to leave its policy rate unchanged in May, even as inflation remains a key concern.
"Japan’s core inflation accelerated in March, yet economic uncertainty will limit the Bank of Japan’s ability to continue hiking rates in the near term. With inflation seen accelerating further, a BoJ tightening is likely in July," they said in a note.
The reading comes days ahead of the BOJ policy meeting due on April 30-May 1. The BOJ kept interest rates steady last month, but warned of stickier inflation in the coming months, priming the central bank to raise interest rates further.
"The BoJ will base rate decisions on what happens with concessions made between the US and Japan and where the US tariffs policies go from here," ING analysts added.