A hotter-than-expected reading on Tokyo inflation has strengthened the case for a Bank of Japan rate hike as soon as May, according to ING, which points to signs of broadening price pressures across both goods and services.
Consumer price inflation in the Japanese capital rose to 2.9% year-on-year in March, up from a revised 2.8% in February and ahead of market expectations for a 2.7% gain. Core inflation, which excludes fresh food, also picked up to 2.4%, beating consensus forecasts of 2.2%.
ING analysts note that while prices for fresh food and utilities eased slightly over the month, broader inflation pressures remain persistent. Notable gains were seen across key categories: household goods rose 5.2%, clothing climbed 3.1%, and medical care increased by 2.4%.
“Price pressures are becoming more broadly based, and this trend reinforces our long-held view that the Bank of Japan will raise rates in May,” ING said in a note following the data release.
The firm also highlighted rising processed food prices, noting that earlier spikes in fresh food costs are beginning to flow through to broader categories — including eating-out prices — with a time lag. These second-round effects are already being monitored closely by the BoJ.
With inflation momentum building across both goods and services, ING believes the risks are skewed toward a policy response sooner rather than later. “Upside risks to inflation are growing, and the odds of a rate hike in May are clearly increasing,” the note added.
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The data earlier:
And we also heard from the BoJ:
USD/JPY update – all over the place!
