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Japan's Inflation Accelerates in March, Driven by Rising Rice Prices

Core inflation likely reached 3.2% year-over-year as household price expectations surged, while global trade uncertainties complicate the BOJ's rate hike strategy.

Sacks of rice are pictured at the rice dealer's shop Mikawaya, in Tokyo, Japan June 7, 2021. Picture taken June 7, 2021. REUTERS/Sam Nussey/File photo
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Overview

  • A Reuters poll estimates Japan's core inflation climbed to 3.2% in March, up from 3% in February, due to rising rice prices and broader cost pressures.
  • Household inflation expectations have increased, with 86.7% of surveyed households anticipating price rises within the next year, the highest level since mid-2024.
  • The Bank of Japan faces pressure to continue normalizing its monetary policy, with inflation exceeding its 2% target for nearly three years.
  • Global trade uncertainties, including U.S. tariffs and heightened tensions with China, complicate the timing of the BOJ's next rate hike, now expected in early 2026 by some analysts.
  • Rising living costs are straining household budgets, with reduced spending on leisure activities and mounting political pressure for government intervention to mitigate economic hardships.