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MNI POLICY: Tokyo March Core CPI Drop Slows on Energy Prices
--Tokyo March Core CPI Falls 0.1% Vs. -0.3% in Feb
Tokyo's core inflation rate fell for the eighth straight month in March but the decline slowed in the wake of smaller falls in energy prices and higher household durable goods.
Tokyo's core CPI continued to be weighed down by the past drop in energy prices but the negative contribution from energy items narrowed to -0.41 percentage points in March from -0.51 pp in February.
Core inflation in the capital fell 0.1% y/y in March vs. -0.3% in February and points to a higher nationwide inflation rate with the core number likely to rise from February's -0.4%, with national data due out on April 23.
Prices for energy items fell 7.8% y/y in March, narrowing from -9.8% in February.
The March data had little impact on the Bank of Japan's view that the inflation rate is expected to be negative for the time being, largely influenced by the Covid-19 disruptions and the past drop in crude oil prices.
But bank officials expect downward pressure on inflation to increase if the government resumes the "Go To" travel campaign and they are worried about the impact of weaker prices on inflation and economic growth expectations.
Bank officials maintained the view that the core CPI, excluding the special factors, remained firm, compared with a big negative output gap (-4.83 percentage points in Q2), as retail price cuts have not expanded.
However, they continue to pay attention to how a prolonged weak inflation rate will lower medium- to long-term inflation expectations and growth expectations, and cause corporate retail price cuts.
CORE-CORE CPI RISES
Core-core CPI, which excludes fresh foods and energy and is the BOJ's key inflation indicator, rose 0.3% y/y in March, for the third straight rise following +0.2% in February and in January.
Processed food prices, which accounts for 15% of the total CPI that BOJ officials are focused on, fell 0.2% y/y in March, unchanged from -0.2% in February.
Prices for accommodations were unchanged y/y in March, narrowing from a 5.1% fall in February. This sector's contribution turned +0.08 pp in March from -0.08 pp in February.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.