Tokyo inflation slows further ahead of BOJ leadership shift

INFLATION in Tokyo slowed further in March, following a sharp deceleration in the previous month that was mainly driven by government subsidies for electricity costs.

Consumer prices excluding fresh food rose 3.2 per cent in the capital from a year ago, slowing from February’s figure of 3.3 per cent, according to the ministry of internal affairs on Friday (Mar 31). Economists had forecast a 3.1 per cent increase.

The steady easing of price gains may add some credence to the central bank’s current view that inflation will slow further, as it works through its first leadership transition in a decade.

The further deceleration in the inflation gauge suggests that Prime Minister Fumio Kishida’s stimulus measures continued to curb price hikes. The package announced last year, which included a 20 per cent discount on household electricity rates, began to feed into data from February.

Economists point out that a higher year-earlier base also helped moderate the increase this month. Last March, core inflation in Tokyo climbed 0.8 per cent, the fastest clip in more than two years at the time.

The central bank will update its economic outlook at its April policy meeting after assessing its price forecast for the coming years. The Bank of Japan (BOJ) now sees inflation slowing below 2 per cent again during the next fiscal year starting April.

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Separate data showed the labour market condition worsened slightly in February, with the unemployment rate increasing to 2.6 per cent and the jobs to applicant ratio edging down to 1.34, meaning there were 134 jobs offered for every 100 applicants. BLOOMBERG