Investing.com-- Japanese consumer price index inflation grew slightly more than expected in February, with a rise in underlying inflation fueling bets that the Bank of Japan will keep raising interest rates this year.
National CPI grew 3.7% year-on-year in Feb, cooling slightly from the prior month’s reading of 4.0%, government data showed on Friday.
Core CPI, which excludes fresh food prices, grew 3.0% y-o-y, compared to expectations of 2.9% and a 3.2% rise seen in January.
A core reading that excludes both fresh food and energy prices rose 2.6% in Feb from 2.5% in the prior month. The reading is closely watched as a gauge of underlying inflation by the BOJ, and remained well above the central bank’s 2% annual CPI target.
Friday’s CPI print showed that Japanese inflation remained largely sticky amid rising living costs and expectations of higher wages.
The reading comes just days after the BOJ kept interest rates steady, but warned of stickier inflation in the coming months, priming the central bank to raise interest rates further.
Analysts expect the BOJ to raise rates by as soon as May, especially if Japanese inflation continues to rise. The central bank is expected to raise rates to at least 1% by end-2025, from current levels of 0.5%.
Springtime wage negotiations between major Japanese employers and labor unions are expected to yield another year of bumper wage hikes, further underpinning private spending and long-term inflation expectations.
Strong wage growth in 2024 was a main motivator of the BOJ’s monetary tightening.