Japan Core Inflation Drops In March

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Japan Core Inflation Drops In March

Japans Core Inflation Drops In March, Yen Turns Weak

The situation is getting a little bit complicated in Japan after the release of March's core CPI. According to official data, the core CPI dropped under the 3% threshold, the first such event in almost a year.

According to experts, any further weakness in the Yen, along with the inflation situation, could make things complicated for the Bank of Japan.

The CPI is based on nationwide data and doesn't account for fresh food items. As per the data, the core CPI in March was 2.6% when compared with the earlier year.

Core Cpi Reached 2.9% In March.

If we look back, February's reading was 2.8%, which suggests a change of -0.2% in March. Despite the short-term setback, the core CPI in Japan is still above the target of 2%.

Meanwhile, inflation, including energy and fresh food, also declined to 2.9% in March from a 3.2% print in February. If we look back, that's the first time since Nov 2022 that the index has dipped under 3.0%.

An economic expert commented on the core CPI by saying that it is still within the BoJ's forecast. However, what's truly unexpected is the weakness seen in the Japanese Yen despite the rising crude oil prices.

Now, the markets are looking for any hints that can strengthen the case of yet another rate hike from the BoJ. However, that will still be too soon, given that the BoJ has just moved from negative rates territory into a positive one.

That's why it is expected that the short-term rates in Japan will remain at the current levels even at the April 2024 meeting. At the meeting, the BoJ is also expected to release forecasts for the GDP and the CPI.

Over all, it appears that the bigger problem for the BoJ is the depreciation of the Japanese Yen (JPY) as compared to the weakness seen in the core CPI and CPI.

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