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Feb core CPI up 3.1% yr/yr, matches forecast
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Index excluding fresh food, fuel costs rises 3.5% in Feb
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Data shows cost-push pressure from raw materials easing
(Adds analyst quote, graphic link)
By Takahiko Wada and Leika Kihara
TOKYO, March 24 (Reuters) - Japan's core consumer
inflation slowed in February but an index stripping away energy
costs hit a four-decade high, data showed on Friday, suggesting
cost-push pressures may persist longer than policymakers
thought.
With inflation still exceeding the Bank of Japan's 2%
target, the data will keep alive market expectations of a tweak
to its bond yield control policy under incoming governor Kazuo
Ueda, analysts say.
The core consumer price index (CPI), which excludes volatile
fresh food but includes oil products, rose 3.1% in February from
a year earlier, matching a median market forecast and slowing
sharply from a 41-year high of 4.2% seen in January.
The slowdown was mostly due to the effect of government
subsidies to curb utility bills. Prices of non-energy items like
food and daily necessities continued to rise, a sign the
pass-through of rising raw material costs have yet to run its
course.
"Inflationary pressure remains strong," said Yoshiki Shinke,
chief economist at Dai-ichi Life Research Institute. "Many food
producers have announced plans to hike prices further in March."
Highlighting the lingering cost-push pressure, a separate
index that strips away both fresh food and fuel costs rose 3.5%
in February from a year earlier, accelerating from a 3.2% gain
in January.
The index, dubbed "core-core" CPI and closely watched by the
BOJ as an indicator of price moves reflecting demand, marked the
fastest year-on-year increase since January 1982.
The data highlight the challenge the BOJ faces in gauging
whether the cost-push inflation will shift to a more sustained,
demand-driven price rise - or cool consumption and choke off a
fragile economic recovery.
The price and wage outlook will be key to how soon the BOJ
can phase out its bond yield control policy under incoming head
Ueda, who succeeds Haruhiko Kuroda when his term ends in April.
Ueda has said stronger wage growth must accompany cost-push
inflation for price growth to steadily hit the bank's 2% target.
Some BOJ policymakers have flagged the chance inflation
could exceed initial expectations, as price hikes and wage gains
show sign of broadening.
In closely watched annual labour talks with union earlier
this month, top Japanese companies agreed to their largest pay
increases in a quarter century in a sign the country may be
finally shaking off the public's sticky deflationary mindset.
However, with global commodity prices having peaked and
the yen's rebound reducing import costs, many analysts share the
BOJ's view that inflation will slow back below its 2% target
later this year.
The recent market rout caused by the failure of two U.S.
banks, and the takeover of Credit Suisse, also complicates the
BOJ's policy path by adding to risks for Japan's economy.
"The (CPI) numbers are fluctuating due to supply shocks and
its repercussion, as well as the effect of government steps to
combat rising living costs," said Yasunari Ueno, chief market
economist at Mizuho Securities.
"The new BOJ leadership will scrutinise Japan's price
trend, as well as U.S. and European developments, in deciding
its policy move," he said.
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Japan's core inflation off 41-year high ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Takahiko Wada and Leika Kihara; Editing by Sam
Holmes)
