This morning saw the release of March inflation figures for the Tokyo area, which are traditionally a good leading indicator for inflation in Japan as a whole. And for a change, the figures surprised on the upside. And not because of rising food and energy prices. No, this time it was the core rate, Commerzbank's commodity analyst Volkmar Baur notes.
Inflation figures surprise on the upside
"At 2.9%, the inflation rate was slightly higher than in the previous month (revised down from 2.9% to 2.8%) and also exceeded most analysts' expectations (2.7%). As mentioned above, this month's increase was mainly driven by the core rate, which rose from 0.8% to 1.1%. However, this also shows that we are not talking about worrying levels and that the lion's share of the current headline rate still comes from food. The annual rate for fresh food remains at 12.9% and for all other food at 5.6%."
"The core rate is likely to rise sharply again next month, as a low base will be removed from the April data. This special effect from April last year had distorted the core rate downwards in recent months. Even so, the core rate is likely to remain below 2% and will not signal a problematic development. Moreover, the nationwide inflation rate is not affected by this special effect, so it will have no impact on the Bank of Japan's monetary policy."
"This morning, the JPY benefited slightly from the slightly higher core rate and remained stable against the US Dollar. However, next week's movements will be more influenced by the US reciprocal tariffs, which will be published on the 2nd of April."
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