An index excluding fuel costs surged at the fastest annual pace in the last four decades.
Data also included may keep alive market expectations that the Bank of Japan could initiate a phase-out later this year, with a massive stimulus program that has drawn public criticism for prejudicing bond markets and crushing the margins of financial institutions.
Shinke Yoshiki, chief economist at Dai-ichi Life Research Organisation, said, “Inflationary pressure is proving stronger than expected and could last for longer than thought.”
“But there’s still a lot of uncertainty on whether wages will rise durably and underpin consumption, which may keep the BOJ in a holding pattern,” he added.
On Friday, the government data showed that the core consumer price index, which excludes volatile fresh food, but involves energy costs, climbed 3.1% in March from the previous year, matching a median market forecast.
On the other hand, it followed February’s increase of 3.1%, which was a sharp downshift from January’s 41-year high of 4.2%, which is due largely to the influence of the government entitled to soften the cost of utility bills for properties.
Also, in March, an index stripping out the effects of both fresh food and energy, which is closely watched by the BOJ as a better gauge of underlying price trends, climbed 3.8% from February’s 3.5% and surged for the 10th straight month.
The periodical rise in the so-called “core core” index was the fastest since December 1981, while Japan was experiencing an asset-inflated bubble economy.
While government entitlement kept utility bills down, prices increased for several daily necessities and foods, for instance, fried chicken, which rose 12%, and laundry detergent, which climbed 18%, the data showed.
Additionally, the service price rose 1.8% year over year in the previous month, quicker than the 1.5% growth in February, with restaurants charging 7.6% more than in the previous year’s levels.
Despite a long history of resisting price increases, sustained increases in the price of commodities throughout the world have forced many Japanese businesses to ultimately pass on their increased costs to customers, driving consumer inflation substantially above the BOJ’s target.
Kazuo Ueda, the new BOJ Governor, has vowed to keep financial policy ultra-loose until there is more evidence provided that the increase in inflation has become sustainable and has been driven by strong demand, rather than supply pressures.
In the upcoming meeting held next week, at Ueda’s first policy setting, the BOJ is broadly anticipating making no major changes to its “bond yield control policy”, say sources similar to its thoughts.
However, Japan’s markets are primarily focusing on the BOJ’s quarterly outlook report due after the meeting, which will include inflation estimates continuing through fiscal 2025.
- Published By Team Genuine Reporter