Core Inflation in Japan Holds at 3% in February Amid Expectations of Further Rate Hikes
Japan's core consumer inflation stood at 3.0% in February, remaining above the Bank of Japan's (BOJ) 2% target, reinforcing market expectations for further interest rate hikes. According to government data released on Friday, this increase exceeded market forecasts, which had anticipated a rise of 2.9%.
However, inflation slightly slowed compared to January, when it reached 3.2%, mainly due to the resumption of government subsidies aimed at curbing fuel costs. Meanwhile, a separate index closely monitored by the BOJ—which excludes both fresh food and fuel costs—rose by 2.6% year-on-year in February, up from 2.5% in January. This marks the fastest annual increase since March 2024, when it climbed to 2.9%.
Despite inflation remaining above target levels, the BOJ decided to keep interest rates unchanged. The central bank had previously ended its decade-long massive economic stimulus program last year and raised interest rates to 0.5% in January, signaling a shift towards achieving sustainable inflation.
Policymakers at the BOJ have indicated their willingness to continue raising interest rates if they become convinced that inflation will stabilize around the 2% target, supported by strong wage growth.
