MNI BRIEF: Japan Mar Core CPI Rises 3.1% Vs Feb 3.1%

Japan's steady annual core consumer price index number, which held steady at 3.1% y/y in March, will surprise Bank of Japan officials who had expected a lower increase, MNI understands.

March's core CPI print matched February's, Ministry of Internal Affairs and Communications data showed Friday, and could prompt the BOJ to review its price view that the y/y rise in core CPI will fall below 2% toward the middle of fiscal 2023 (See: MNI POLICY: BOJ Board’s FY25 Core CPI Outlook Near 2%).

Core-core CPI (excluding fresh food and energy) rose 3.8% y/y in March, accelerating from February's 3.5%, due to higher food prices caused by pass-through of cost increases. The negative contribution from energy on CPI widened to -0.32 pp in March from -0.06 pp in February. Prices for processed foods, accounting for 15% of the total CPI, rose 8.3% in March compared to 8.1% in February, indicating pass-through of cost increases continued.

The BOJ's focus has shifted to service price increases due to its effect on wages. Prices for eating out rose 7.6% in March compared to 7.2% in February, showing firms are transferring high costs to retail prices.