Japan’s inflation rate surged 3.6% year-on-year in March, marking three consecutive years above the Bank of Japan’s 2% target. The latest data comes as trade talks with the US are ongoing, with President Donald Trump claiming “big progress” has been made.
The core inflation rate, which excludes food and energy costs, rose to 2.9%, while core inflation excluding fresh food climbed to 3.2%. These numbers were slightly higher than February’s readings.
The strong inflation figure could lead the Bank of Japan to increase interest rates and normalize its monetary policy. However, with US tariffs looming, Japan’s GDP growth is at risk, which may constrain the BOJ’s room for rate hikes.
Analysts at Nomura predict that the BOJ will only hike interest rates once by January 2026, citing downward pressure on wage growth due to Trump tariffs. They also expect Japan’s real GDP to grow at “close to zero” in the July-September quarter of 2025.
Source: https://www.cnbc.com/2025/04/18/japan-inflation-comes-in-at-3point6percent-surpasses-boj-target-for-three-straight-years-.html