Japan’s headline CPI inflation rose 1.5% year-on-year in March (vs 1.3% in February, 1.4% market consensus) and core inflation excluding fresh food accelerated for the first time in five months to a 1.8% rate (vs 1.6% in February, 1.7% market consensus). The index increased by 0.4% month-over-month on a seasonally adjusted basis, reflecting increased pressure from goods, which rose by 0.6%, while services also increased by 0.2%.
Looking at the details, prices for fresh food (-4.8%), gasoline (-5.4%), utilities (-4.8%), and education (-5.5%) dropped. Fresh food prices dropped for four consecutive months, mostly due to a high base last year driven by rice prices. The last three price drops were due to government energy subsidies and social welfare programmes. Aside from these items, increases became more widespread with household goods (2.7%), transport (2.1%), and entertainment (2.3%). Although core inflation is below 2% for a second month, excluding policy effects, inflation should stay well above 2%.