Core Inflation in Japan’s Capital Hits 2.4％, Stays above BOJ’s Target

Reuters

10:00 JST, March 28, 2025

TOKYO (Reuters) — Core consumer inflation in Japan’s capital stayed above the central bank’s target and accelerated in March on steady gains in food costs, data showed on Friday, keeping alive market expectations of a near-term interest rate hike.

The data, which is closely watched by policymakers as a leading indicator of nationwide price trends, highlights mounting inflationary pressure as companies continue to pass on rising raw material costs to households.

The Tokyo consumer price index (CPI), which excludes volatile fresh food costs, rose 2.4% in March from a year earlier, government data showed, faster than a median market forecast for a 2.2% increase. It accelerated from a 2.2% gain in February.

A separate index for Tokyo that strips away both fresh food and fuel costs — closely watched by the BOJ as a measure of domestic demand-driven prices — rose 2.2% in March from a year earlier after a 1.9% rise in February, the data showed.

Food prices rose 5.6% in March, faster than a 5.0% gain in February. The cost of rice surged 92.4% in March, a sign of the pain households were feeling from rising living costs.

The BOJ exited a decade-long, radical stimulus program last year and raised short-term interest rates to 0.5% in January on the view Japan was on the cusp of sustainably hitting its 2% inflation target.

Governor Kazuo Ueda has said the BOJ will keep pushing up borrowing costs if continued wage gains underpin consumption and allow firms to raise prices, thereby maintaining inflation stably around its 2% target.

The Tokyo CPI data will be among factors the BOJ will scrutinize in producing fresh quarterly growth and price forecasts at its next policy meeting on April 30-May 1.

A Reuters poll showed many analysts expect the BOJ’s next rate hike to come in the third quarter, most likely in July.