TOKYO (Reuters) – Japan’s core inflation probably accelerated in March from the previous month as rice prices rose, a Reuters poll showed, a sign of persistent cost pressure that is likely to encourage the central bank to proceed with monetary policy normalisation.
Still, the Bank of Japan is facing the difficult task of timing its next interest rate hike as U.S. President Donald Trump’s tariffs and a trade war with China raise fears of a global recession.
The core consumer price index (CPI), which includes oil products but excludes fresh food prices, was expected to have climbed 3.2% in March from a year earlier, a poll of 17 economists showed on Friday. That figure compared with 3% in February.
“While government subsidies for electricity bills would curb energy price growth, the year-on-year increase in prices is expected to widen from the previous month due to continued price rises in a wide range of items, including rice,” said Shunpei Fujita, economist at Mitsubishi UFJ Research and Consulting.
A separate index that strips away the effects of both fresh food and fuel costs and is closely watched by the Bank of Japan as a broader price trend indicator, was expected to pick up to 2.8% in March from 2.6% in February, SMBC analysts said.
Stubbornly high food prices and rising wages have kept consumer inflation above the BOJ’s 2% target for nearly three years, underpinning market expectations the central bank will continue increasing interest rates from the current 0.5%.
Although Trump this week announced a 90-day postponement on plans for sweeping tariffs on goods imported into the U.S, he stepped up duties on China, while maintaining 25% tariffs on aluminium, steel and autos and a blanket 10% levy on imported goods.
That has complicated the BOJ’s rate-hike path by threatening to derail a moderate recovery in Japan’s export-driven economy.
The internal affairs ministry will release March CPI data at 8:30 a.m. on April 18 (2330 GMT on April 17).
(Reporting by Satoshi Sugiyama; Editing by Kate Mayberry)
