Tokyo Inflation Accelerates, Keeping BOJ on Rate Hike Path
The cost of living in Tokyo rose at a slightly faster pace than the previous month, keeping the Bank of Japan on track for gradual interest rate hikes.
Consumer prices excluding fresh food rose 2.4% in March from a year earlier as inflation in processed food accelerated, according to the ministry of internal affairs Friday. The result was more than the median economist forecast of 2.2%, and higher than any estimate by economists surveyed by Bloomberg.
Overall inflation picked up to 2.9% from February’s 2.8%.
The leading indicator for nationwide inflation is likely to keep BOJ Governor Kazuo Ueda mulling over the right timing for further rate hikes. While US President Donald Trump’s tariffs have darkened the outlook for the global economy, Japan’s recent domestic data have illustrated progress toward the BOJ’s stable inflation target, helping speculation over the next rate increase.
While most economists expect the central bank to wait until June or July to raise interest rates again in their base case scenarios, many have said there’s a risk of an earlier move at the May 1 conclusion of the next board meeting.
Friday’s data showed continued upward pressure from food inflation as non-fresh foods rose 5.6%. Rice prices jumped 92.4%, the biggest jump in data going back to 1971.
The spike in the cost of rice has caused widespread public concern, forcing the government to release emergency stockpiles of the country’s staple food this month for the first time.
Businesses have continued to pass their costs onto consumers on the back of a lingering weakness in the yen and the rising cost of materials and labor. Major food companies have raised the price of 2,343 products in March, around three times the number a year ago, according to Teikoku Databank.
Source : Bloomberg
