Japan core inflation rose 3% in Feb, bolstering rate hike expectations

Japan’s core inflation beat expectations and got here in at 3% in February, government data confirmed on Friday, bolstering the case for further interest rate hikes.

The core inflation determine — which excludes costs of recent meals — was increased than expectations of two.9%, in accordance with economists polled by Reuters, however decrease than January’s determine of three.2%.

Headline inflation rose 3.7% yr on yr in February, easing from a two-year high of 4% seen final month. It means the headline inflation price has remained above the Financial institution of Japan’s 2% goal for 35 straight months.

The so referred to as “core-core” inflation price, which strips out costs of each recent meals and power and is carefully monitored by the BOJ, climbed to 2.6% from 2.5% within the month earlier than.

The info comes shortly after the central financial institution held interest rates steady at 0.5% on Wednesday.

In its statement, the BOJ mentioned that “underlying CPI inflation is anticipated to extend progressively” and be “usually constant” with its goal of two%.

The BOJ mentioned core inflation is more likely to improve over its 2025 fiscal yr, attributable to excessive rice costs and the easing of presidency measures to push down inflation.

Change price developments are additionally extra more likely to have an effect on costs, the BOJ added, saying “there stay excessive uncertainties surrounding Japan’s financial exercise and costs, together with the evolving scenario concerning commerce and different insurance policies in every jurisdiction.”

The Japanese yen strengthened 0.1% after the information launch to commerce at 148.61 in opposition to the greenback, whereas the benchmark Nikkei 225 slipped marginally.

When the BOJ raised charges to 0.5% in January, the central financial institution mentioned in its summary of opinions that Japan’s financial exercise and costs have been growing “usually consistent with the Financial institution’s outlook,” including: “If financial exercise and costs stay on monitor, it is going to be needed for the Financial institution to proceed to lift the coverage rate of interest accordingly.”

Japan’s largest labor union introduced on March 14 that it managed to safe a median 5.46% increase in wages from April — its largest improve in over three many years.

The Japanese Commerce Union Confederation, or Rengo, which has round 7 million members, mentioned that the primary tabulation of the outcomes overlaying 760 unions was 0.18 proportion factors increased than final yr’s improve of 5.28%.

Small to medium-sized companies noticed a median price rise of 5.09%, up 0.67 proportion factors from final yr and the primary time since 1992 that the wage hikes for such firms crossed the 5% mark.

UA Zensen, an umbrella group representing retail, restaurant and different trade unions, reportedly mentioned 139 of its member unions acquired an average increase of 5.37% in monthly wages for full-time staff, barely lower than 2024’s file determine of 5.91%.