On April 21, Japanese government data showed that the core CPI (excluding the volatile fresh food, but including energy costs) rose 3.1% year-on-year in March, in line with expectations; while the CPI index excluding the impact of fresh food and energy rose from 2 It rose 3.8% from 3.5% in the month and accelerated for the 10th straight month, the fastest gain since December 1981.
The index is closely watched by the Bank of Japan as it provides a better gauge of underlying price trends. Data showing rising price pressures in Japan are likely to keep expectations that the Bank of Japan may gradually unwind its massive stimulus program later this year.
At the new governor’s first policy meeting next week, the Bank of Japan is widely expected to make no major adjustments to the YCC and give dovish guidance on the outlook for interest rates.
Market attention will be on the quarterly outlook report to be released after the meeting, which will include inflation forecasts through fiscal 2025.