Japan's core inflation rose at its fastest annual rate in 40 years in March.

(Reuters file photo)

[Financial Channel/Comprehensive Report] Data showed that Japan's consumer inflation rate stabilized above the central bank's target in March, and the core index excluding fuel costs grew at the fastest annual rate in 40 years, indicating that the world's third largest economy Price pressures are building up, testing the dovish stance of the Bank of Japan (BOJ).

"Reuters" reported that the data released by the Japanese government on Friday (20th) showed that the core CPI (consumer price index), which excludes volatile food and energy prices, increased by 3.8% in March, rising for the 10th consecutive month. The increase was the fastest since December 1981, when Japan was experiencing a bubble economy.

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CPI, which excludes food prices but includes energy costs, rose at a 3.1% annual rate, in line with median expectations, a sharp slowdown from a 41-year high of 4.2% in January, largely due to government subsidies that lowered household utility bills cost impact.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Japan, said inflationary pressures are proving to be stronger than expected and may last longer than thought.

But there is still a lot of uncertainty about whether wages will continue to rise and support consumption, which could keep the BOJ in a hold mode.

Global commodity prices continue to rise, making Japanese companies that have been reluctant to raise prices for a long time finally pass on higher costs to consumers, pushing consumer inflation far above the central bank's 2% target.

New Bank of Japan Governor Kazuo Ueda has vowed to maintain ultra-loose monetary policy until there is more evidence that rising inflation has stabilized and is being driven by strong net demand rather than supply pressures.

With Ueda's first policy meeting due next week, the BOJ is widely expected to make no major changes to its bond yield control policy, people familiar with the matter said.

Markets will focus on the quarterly outlook report after the Bank of Japan meeting, which will include inflation forecasts through fiscal 2025.

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