Japan’s core inflation accelerates, complicating Boj’s rate path

Data showed on Friday that Japan’s core inflation accelerated in March as food costs continued to rise, which allowed the central bank’s mission to keep price pressures growing to remain risky to the economy by higher U.S. tariffs.

The data comes ahead of next week’s Japan Bank policy meeting, when the central bank will stabilize amid steep tariffs by U.S. President Donald Trump and cut its growth estimates.

Government data shows that the core consumer price index (CPI) that includes petroleum products but excludes fresh food prices rose 3.2%, showing a year ago that conforms to the median market forecast and grew from 3% in February.
Core inflation has now surpassed the shed’s 2% target for three consecutive years, indicating price increases as companies continue to pass rising raw materials and labor costs.

Inflation is measured by an index that strips fresh food and fuel costs from impacts – by BOJ as a broader indicator of price trends, also accelerated from 2.6% in February to 2.9%.

Households are facing price increases in a variety of commodities, including gasoline, hotel bills and chocolate. Rice prices soared 92.5% in March from levels a year ago. For policymakers working to quantify the potential damage caused by higher U.S. tariffs, the impact on consumption will add to headaches, which has the potential to differentiate the modest recovery in Japan’s export-dependent economy. “Recent U.S. tariff measures will affect various industries and increase uncertainty,” Finance Minister Katsunobu Kato told Reuters on Thursday. “We are very worried that they will affect Japan’s economy as well as the global economy.”

Stubborn food prices and wages have pushed consumer inflation above Boj’s 2% target, and the market expectation basis will allow central banks to continue to raise interest rates from the current 0.5%.

But Trump’s tariff plans shocked financial markets and shocked concerns about a global recession, which allowed the shed to continue raising interest rates.

BOJ Governor Kazuo Ueda said Thursday that central banks will continue to raise interest rates, but are wary of the economic uncertainty of U.S. tariffs.

Although Washington announced a 90-day delay in tax collection plans for goods imported into the U.S., it retained a 25% tariff on aluminum, steel and automobiles, and 10% blankets on blankets for imported goods.