TOKYO: Japan’s inflation slowed to 2.6% in March, largely in line with market expectations, data revealed on Friday. The year-on-year (YoY) rise in prices excluding volatile fresh food — against a market consensus of 2.7%– followed a 2.8% February increase, in part thanks to lower gas bills.
Stripping out fresh food and energy, prices rose 2.9%, against market expectations of 3.0%, and edged down from 3.2% in February. After years of deflation in the world’s number four economy, the Bank of Japan has sought to generate increasing prices with ultra-aggressive monetary stimulus policies.
But in March, it raised borrowing cost rates for the first time since 2007 and scrapped the world’s last negative interest rate, in part due to meeting its 2% inflation target.
Bank of Japan’s Meeting
The Bank of Japan will hold a meeting next week when it will likely raise inflation forecasts. Other major central banks including the Federal Reserve in the US have much higher interest rates. But Japanese Finance Minister Shunichi Suzuki said on Friday that this was not the only factor in the yen’s recent sharp drop to nearly a 34-year low against the dollar.
Shunichi Suzuki said that he did not believe that the rate difference alone was setting the current level. This week, Suzuki and his South Korean counterpart issued a joint statement expressing grave concerns about the recent weakness of their currencies and agreed to take appropriate measures if needed. Japan’s government last intervened in markets to support the yen in October 2022, when it spent 6.3 trillion yen (nearly 40 billion dollars today) on forex intervention operations.
