Tokyo inflation slowdown

Core inflation in Japan’s capital slowed in March and factory output unexpectedly slid in the previous month, heightening uncertainty on how soon the Bank of Japan can raise interest rates again after exiting its radical monetary stimulus. The slew of weak signs in the economy could prompt the central bank to go slow in its next rate hike and give investors an excuse to continue selling yen, keeping pressure on Japanese authorities to intervene in the market to prop up the currency. “Factory output is weaker than expected,” said Masato Koike, an economist at Sompo Institute Plus. “Given the weakness in production, the BOJ may find it hard to raise interest rates again soon.” Core consumer price index (CPI) in Tokyo, an early indicator of nationwide figures, rose 2.4% in March from a year earlier, matching a median market forecast and slowing slightly from a 2.5% gain in February. of both fresh food and fuel costs, viewed as a broader price trend indicator, also showed inflation slowing to 2.9% in March from 3.1% in February, data showed on Friday. While core inflation is still above the central bank’s 2% target, the slowdown underscores how price pressures in Japan are still predominantly coming from raw material costs rather than robust domestic demand. “Cost-push inflationary pressures are weakening. We’re also seeing a slowdown in service-sector inflation,” said Toru Suehiro, chief economist at Daiwa Securities. Separate data showed on Friday Japan’s factory output unexpectedly fell by 0.1% in February from the previous month, against a median market forecast for a 1.4% rise. BOJ Governor Kazuo Ueda has said the central bank could hike rates again if inflation overshoots expectations or upside risks to the price outlook heighten significantly. Big firms have offered bumper pay hikes in this year’s annual wage negotiations, heightening the prospect that Japan will see inflation sustained around the BOJ’s 2% target.