Japan’s March core consumer prices rise 3.1%, stays above BOJ target

By Leika Kihara and Takahiko Wada

TOKYO (Reuters) – Japan’s core consumer prices rose 3.1% in March from a year earlier, data showed on Friday, staying above the central bank’s target of 2% as companies continued to pass on rising costs to households.

The data may keep alive market expectations that the Bank of Japan (BOJ) could phase out later this year a massive stimulus programme that has drawn public criticism for distorting bond markets and crushing financial institutions’ margins.

The increase in the nationwide core consumer price index (CPI), which excludes volatile fresh food, but includes energy costs, matched a median market forecast.

It followed February’s increase of 3.1%, which was a sharp slowdown from January’s 41-year high of 4.2%, due largely to the effect of government subsidies to curb utility bills for homes.

The so-called “core core” CPI, which strips out the effect of both fresh food and energy, rose 3.8% in March from a year earlier, accelerating the pace of increase for the 10th straight month, the government data showed.

Persistent rises in global commodity prices have prodded many Japanese companies, long reluctant to hike prices, to finally pass on their higher costs to consumers, pushing up consumer inflation to well above the BOJ’s 2% target.

BOJ officials, including new governor Kazuo Ueda, have vowed to keep monetary policy ultra-loose until there is more evidence that the rise in inflation has become sustainable and driven by strong demand rather than supply pressures.

At Ueda’s first policy-setting meeting next week, the central bank is widely expected to make no major changes to its bond yield control policy and dovish guidance on the outlook for interest rates, say sources familiar with its thinking.

Markets are focusing on the BOJ’s quarterly outlook report due after the meeting, which will include inflation forecasts extending through fiscal 2025.

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