Japan Core Inflation Likely Ticked Up to 1.8 Percent

Core consumer inflation in Japan likely accelerated in March due to rising energy costs, according to a recent Reuters poll of 16 economists. The nationwide core consumer price index (CPI), which excludes fresh food but includes energy products, is projected to have reached 1.8% compared to the same month last year. While this represents a slight increase from the 1.6% rate seen in February, it marks the second consecutive month that inflation has remained below the 2% target established by the central bank.

Market analysts suggest that the ongoing conflict involving the United States, Israel, and Iran is exerting upward pressure on global energy markets. Given that the Japanese economy depends on the Middle East for roughly 95% of its oil requirements, the price of Brent Crude Oil remains a critical factor for domestic price stability. Furthermore, the continued weakness of the USD/JPY exchange rate is expected to further fuel inflationary pressures by increasing the cost of imports.

Ippei Ohashi, a senior analyst at the Shinkin Central Bank Research Institute, highlighted the conflicting factors currently influencing the inflation outlook.

Although measures to ease the burden of electricity and gas bills and an expected decline in rice prices are likely to help, a sharp rise in gasoline prices is expected to push up the inflation rate.

Despite the uptick in price pressures, Bank of Japan Governor Kazuo Ueda recently indicated that the central bank is unlikely to implement an immediate interest rate hike. Speaking in Washington, Ueda emphasized the country's low real interest rates and robust corporate profits, suggesting that the bank may maintain its current policy stance until at least June. The official CPI data is scheduled for release by the Ministry of Internal Affairs and Communications on April 24.