By Megumi Fujikawa
TOKYO--Japan's consumer inflation has stayed above the Bank of Japan's 2% target for two years, government data confirmed Friday, amid speculation over further interest-rate increases.
Overall consumer prices rose 2.7% from a year earlier in March, compared with the 2.8% increase seen in February, the data showed. While the cost of natural gas for households was lower than a year ago, food inflation, including prices of fresh food and eating-out, recorded growth.
That continued an upward trend started in April 2022, when inflation rose above the BOJ's target for 2% for the first time in 13 years. It has since stayed above that level.
Economists say inflation could rise at a faster pace in the coming months if the government phases out utilities subsidies as planned at the end of May.
"If inflation continues to evolve in line with the BOJ's projections, further tightening this year may be incoming," said Capital Economics assistant economist Gabriel Ng.
The BOJ's policy board is scheduled to release its quarterly outlook on prices next week.
In March, the bank ended negative interest rates and other easing measures, saying it has become more confident about achieving its inflation target sustainably.
The yen's fall to a nearly 34-year low against the dollar could also give inflation a boost because a weak yen pushes up prices of imports like energy and food.
BOJ Gov. Kazuo Ueda has said the bank would discuss policy action if the yen's depreciation significantly affects the bank's inflation forecast.
In a joint statement earlier this week, finance ministers of Japan and South Korea acknowledged "serious concerns" over their respective currencies' recent depreciation.
Markets widely predict no policy change at the upcoming meeting next week, ING economists said in a commentary Friday. Of more interest will be the quarterly outlook report, in their view.
"We expect the BOJ to revise up its inflation outlook," said Min Joo Kang, ING senior economist for South Korea and Japan. "We will also see the BOJ's first forecast for FY26 [year ending March 2027], which is expected to show core inflation at 2%. These will be an important factors in determining when and how much interest rates will be raised."
Japan's measure of core inflation strips out fresh food.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
04-18-24 2317ET
