TOKYO (Reuters) – Japan’s core inflation slowed in March due to a slight rise in food prices, but remained well above the central bank’s 2% target, government data showed on Friday.
The national consumer price index (CPI), which excludes fresh food, rose 2.6% in March from a year earlier after rising 2.8% in February. It matched the median market forecast.
The “core core” index, which excludes both fresh food and energy costs and is closely monitored by the Bank of Japan as a key indicator of broader inflation trends, rose 2.9% after rising by 3.2% in February. It was the first time since November 2022 that the index fell below 3%.
Markets are looking for clues as to when the central bank will raise rates again after ending negative rates last month, moving away from its decade-long ultra-loose monetary policy.
The BOJ said a virtuous cycle of stable and sustained achievement of its 2% price target and strong wage growth was crucial to normalizing policy.
While Japanese companies have offered their biggest wage increases in 33 years this year, inflation-adjusted real wages have continued to decline for nearly two years. Some analysts expect weak domestic demand to push inflation below the 2% target by the end of the year, complicating the BOJ’s path forward.
The weakening of the yen, pushing up import prices, threatens to further exacerbate the purchasing power of families and weigh on consumption.