- SMBC Nikko Securities
Japan's consumer inflation remained flat in the year to February as low energy costs and weak consumption restrained price growth, keeping the Bank of Japan under pressure to introduce additional stimulus even after easing policy less than two months ago. A separate BoJ index, which strips out the effects of energy and fresh food prices, showed consumer inflation at 1.1% in the year to February, unchanged from January. Core consumer prices in Tokyo, a leading indicator of nationwide prices, recorded the biggest annual decline in nearly three years in March, suggesting that inflation will remain tepid amid weak demand as the world's third-largest economy stands on the edge of recession. The core CPI for the Tokyo metropolitan area slid 0.3% in March, after declining 0.1% in February. The data reinforces a dominant market opinion that the central bank will be forced to cut its inflation forecasts and push back the timing for reaching its 2% price target at a quarterly review of its projections next month.
When the BoJ launched its massive asset-buying programme in April 2013, it pledged to achieve 2% in roughly two years. With inflation remaining benign three years into the commitment, the central bank has repeatedly postpone the timeframe for hitting its inflation goal, including at its January meeting.
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