New Signals from Japan: Inflation Rising, BOJ Tightening?
Tokyo's core inflation rose in February and was higher than expected, heightening market attention on the Bank of Japan's (BOJ) policy direction. Data from the Ministry of Internal Affairs and Communications showed that the Tokyo Core CPI on Friday (February 27th)—which excludes volatile fresh food—rose 1.8% year-on-year, slightly above the median consensus of +1.7%.
Meanwhile, Tokyo's overall CPI rose 1.6% year-on-year, beating the market forecast of +1.4%, indicating persistent price pressures, albeit at a relatively moderate pace. Meanwhile, a more "strict" measure of inflation, the CPI excluding energy and fresh food, rose 2.5% year-on-year, also above the +2.3% estimate.
This string of figures reinforces the signal that price pressures in Japan's metropolitan area have not yet fully subsided, and the market is likely to interpret the Tokyo data as an early indicator of the direction of national inflation. With core inflation again outperforming expectations, market participants will be increasingly sensitive to BOJ communications regarding policy normalization—especially if wage trends and domestic demand remain solid.
Going forward, market focus will be on confirmation through national inflation data and subsequent economic activity indicators. If inflation remains higher than projected, the BOJ could potentially maintain a tighter policy stance, although the decision remains highly dependent on data consistency over the coming months.
Source: Newsmaker.id
