The data comes ahead of the Bank of Japan’s policy meeting next week, when the central bank is set to keep interest rates steady at 0.5 percent and cut its growth estimates as US President Donald Trump’s steep tariffs cloud the economic outlook.
The core consumer price index (CPI), which includes oil products but excludes fresh food prices, rose 3.2 percent in March from a year earlier, government data showed, matching a median market forecast and accelerating from a 3 percent gain in February.
Core inflation has now exceeded the BOJ’s 2 percent target every month for three years in a row, in a sign of mounting price pressure as companies continue to pass on rising raw material and labour costs.
Inflation measured by an index that strips away the effects of both fresh food and fuel costs – closely watched by the BOJ as a broader price trend indicator – also accelerated to 2.9 percent in March from 2.6 percent in February.
Households faced price hikes for a wide range of goods including gasoline, hotel bills and chocolates. Rice prices spiked 92.5 percent in March from year-before levels.
The hit to consumption from rising living costs will add to headaches for policymakers struggling to quantify the potential damage from higher US tariffs that threaten to derail a modest recovery in Japan’s export-reliant economy.
“The recent US tariff measures affect various industries and heighten uncertainty,” Finance Minister Katsunobu Kato told Reuters on Thursday in the government’s strongest warning yet as the two nations began trade talks. “We’re deeply concerned they could affect Japan’s economy, as well as the global economy.”
Stubbornly high food prices and rising wages have kept consumer inflation above the BOJ’s 2 percent target and underpinned market expectations the central bank will continue increasing interest rates from the current 0.5 percent.
But Trump’s tariff plans have jolted financial markets and stoked fears of a global recession, making it less clear whether the BOJ can keep raising rates.
BOJ Governor Kazuo Ueda said on Thursday the central bank would continue to raise interest rates, but it would be vigilant to sharply heightened economic uncertainty from the US tariffs.
Although Washington announced a 90-day postponement on plans for sweeping tariffs on goods imported into the US, it has maintained 25 percent duties on aluminium, steel and automobiles and a blanket 10 percent levy on imported goods. (Reuters)
