Inflation in Japan’s capital likely picked up in February: Reuters poll

By Thomson Reuters Feb 29, 2024 | 10:35 PM

By Satoshi Sugiyama

TOKYO (Reuters) – Core consumer inflation in Japan’s capital likely re-accelerated in February to exceed the central bank’s 2% target, a Reuters poll of economists showed, indicating conditions to ditch negative interest rates were falling into place.

The core consumer price index (CPI) in Tokyo, a leading indicator of nationwide trends, was expected to have risen 2.5% year-on-year, according to a median forecast of 17 economists published on Friday.

That would follow a 1.6% rise in January, when it slowed below the Bank of Japan’s 2% mark to the lowest rate in nearly two years.

“While the momentum of food price increases is expected to slow, the extent of year-on-year declines in energy prices is presumed to be narrower than (in January) as the government’s measures to curb rising prices partially wear off,” said Shunpei Fujita, an economist at Mitsubishi UFJ Research and Consulting.

Japan’s January core inflation slowed for the third consecutive month but held at the BOJ’s target at 2.0%. With inflation having exceeded 2% for well over a year, many market players expect the BOJ to end its negative interest rate policy by April.

BOJ Governor Kazuo Ueda, though, said on Thursday it was too early to declare that the sustained 2% inflation target was achieved.

Meanwhile, economists expected household spending in January to show the biggest year-on-year drop since July last year, reflecting the impact of a fall in real wages.

Household spending likely dropped 4.3% in January from the same month last year but rose 0.4% from the previous month, according to the poll.

Economists in the poll also estimated Japan’s current account balance would fall into deficit for the first time in a year in January, with a gap of 330.4 billion yen ($2.20 billion), following a surplus of 744.3 billion yen in December.

The government will release Tokyo CPI data on March 5 at 8:30 a.m. Japan time (March 4 at 2330 GMT). Household spending data is due on March 8 at 8:30 a.m. (March 7 at 2330 GMT) and the current account data will be available on the same day at 8:50 a.m. (2350 GMT).

($1 = 150.3400 yen)

(Reporting by Satoshi Sugiyama; Editing by Kim Coghill)