Japan’s Inflation Data Pressures BoJ

Third-largest economy in the world by nominal GDP, Japan, has come up with its inflation data for the month of March. The core consumer prices in the country inched up in the month of March, still under-performing the street expectations.

Consumer price index increased 0.2% in March. However, the household spending slipped more than expected, IIFL reported.  

The industrial production for March also plunged more than expected. The economists in the country are still optimistic that the output will rise quickly in the following month, as the strength in overseas economies increases export demand.

Consumer prices have actually tumbled for the first time in almost four years. Many market analysts expect that the Bank of Japan’s next monetary policy meet would move to the tightening of interest rates. The inflation in Japan has been close to zero for past two years, posing as a major policy hurdle for the Bank of Japan’s ambitious and bold inflation target of 2%.

Breakdown shows an ongoing marked upward contribution from energy prices (energy prices boosted the core CPI by +0.17ppt more than in February), but this was cancelled out by weakness in the core portion.

The all-Japan core CPI was -0.3%, which is a wider margin of decline than February’s -0.1%. The larger decline in the core CPI itself, however, was no major surprise, having to some extent been flagged in the Tokyo area data for February.

April Tokyo core CPI (general, excluding fresh food) was -0.1% y-y, above the consensus (Bloomberg survey median) forecast of -0.2% and a substantial improvement from March’s -0.4%. The breakdown shows that the energy and core foods portions pushed up the core CPI.