MNI BRIEF: Japan Mar Tokyo CPI 3.2% Vs. Feb 3.3%

The Tokyo core inflation rate slowed as expected to 3.2% y/y in March from February's 3.3%, suggesting that the nationwide core CPI will continue to decelerate due to government gas and electricity subsidies that run to October, data from the Ministry of Internal Affairs and Communications showed Friday.

The Tokyo core CPI remained above the BOJ's 2% target for 10th straight month in March, a sign that rising raw material costs were steadily pushing up a broad range of prices for daily necessities. While lower energy prices pulled the index lower in March – up 0.3% against February's 5.3% – food prices excluding perishable foods increased, up 8.1% compared to 7.8% the month prior. Processed food and hospitality prices, two key data points for the BOJ, also increased, the data showed.

But some Bank of Japan officials question whether the country's core CPI may not weaken as much as expected in the wake of stronger pass-through of cost increases. The officials are also focused on wage increases. The "core-core" CPI figure, which excludes fresh food and energy and acts as a key inflation trend indicator, rose 3.4% y/y in February, accelerating from 3.1% in January.