Japan’s Inflation Accelerates in March, Increasing Pressure on the BOJ

Japan’s core consumer price index — which includes oil products but excludes fresh food — rose by 3.2% in March, matching forecasts but accelerating from 3.0% in February.

The increase was mainly driven by a persistent rise in food prices, further complicating the Bank of Japan’s position ahead of its upcoming policy meeting on May 1, where the central bank is expected to leave interest rates unchanged while cutting its growth forecast amid growing concerns over the economic fallout from higher US import tariffs.

Core inflation has now remained above the BOJ’s 2% target for three consecutive years, fueled by rising raw material and labor costs, as well as ongoing increases in gasoline, food, and service prices — all of which continue to squeeze both households and businesses.

Economists anticipate inflation, especially for food, will stay elevated in the near term. However, the BOJ’s primary challenge will be managing the economic shock from the US tariffs, with markets now expecting the next rate hike to potentially come in June or later.