TOKYO (Reuters) – Japan’s core inflation likely decelerated in February from the previous month due to the resumption of energy subsidies, a Reuters poll showed, though the overall price trends will likely keep policymakers on track to raise rates again this year.
The core consumer price index (CPI), which includes oil products but excludes fresh food prices, was expected to have risen 2.9% in February from a year earlier, a poll of 18 economists showed on Friday. That figure compares with 3.2% in January.
“Although the growth in the price of oil products is expected to continue to accelerate, the impact of the resumption of subsidies on electricity and city gas prices is expected to be stronger,” said analysts at SMBC Nikko Securities.
A separate index that strips away the effects of both fresh food and fuel costs, closely watched by the Bank of Japan as a broader price trend indicator, would likely stay around January’s 2.5% in February, said Ryosuke Katagi, a market economist at Mizuho Securities.
The price trends back the BOJ’s resolve to keep raising rates, with market expectations centred on a hike happening in the third quarter. Much of the deliberations around policy have also been driven by U.S. President Donald Trump’s economic policies and their global impact.
The internal affairs ministry will release February CPI data at 8:30 a.m. on March 21 (2330 GMT on March 20).
The poll also showed exports were expected to have climbed 12.1% in February from a year earlier, picking up from growth of 7.2% in January.
Imports were estimated to have edged up 0.1% last month year-on-year, resulting in a trade surplus of 722.8 billion yen ($4.88 billion). Imports rose 16.7% in January.
“While the pace of recovery in exports is expected to remain moderate, there is a strong possibility that imports will decrease due to the end of the depreciation of the yen and the rise in crude oil prices, as well as a reaction to the sharp increase in imports in January,” said Takeshi Higashifukasawa, an economist at Mizuho Research & Technologies.
The yen has rebounded against the dollar in recent weeks on growing market bets that the BOJ will continue to raise interest rates, while the U.S. Federal Reserve remains on track to cut borrowing costs further albeit at a slower pace.
The dollar was last up 0.3% against the yen at 148.25 during Friday morning trade in Tokyo, well off the three-decade low near 162 hit last year.
Machinery orders, a highly volatile but leading indicator of capital spending for the coming six to nine months, probably fell 0.5% in January from the previous month, following a 1.2% decline in December, according to the poll.
The government will release the trade and machinery orders data at 8:50 a.m. on March 19 (2350 GMT on March 18).
($1 = 148.1700 yen)
(Reporting by Satoshi Sugiyama; Editing by Shri Navaratnam)
