*
March core CPI rises 3.1% yr/yr, matches forecast
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Core-core CPI up 3.8% yr/yr, hits highest since December
1981
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Core-core CPI accelerates pace of gain for 10th straight
month
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BOJ meets April 27-28 for new governor Ueda's first rate
review
(Adds graphic)
By Leika Kihara and Takahiko Wada
TOKYO, April 21 (Reuters) - Japan's consumer inflation
held steady above the central bank's target in March and an
index excluding fuel costs rose at the fastest annual pace in
four decades, data showed, indicating broadening price pressure
in the world's third-largest economy.
The data may keep alive market expectations that the Bank of
Japan (BOJ) could begin to phase out later this year a massive
stimulus programme that has drawn public criticism for
distorting bond markets and crushing financial institutions'
margins.
"Inflationary pressure is proving stronger than expected and
could last for longer than thought," said Shinke Yoshiki, chief
economist at Dai-ichi Life Research Institute.
"But there's still a lot of uncertainty on whether wages
will rise durably and underpin consumption, which may keep the
BOJ in a holding pattern."
The core consumer price index (CPI), which excludes volatile
fresh food, but includes energy costs, rose 3.1% in March from a
year earlier, government data showed on Friday, matching a
median market forecast.
It followed February's increase of 3.1%, which was a sharp
slowdown from January's 41-year high of 4.2%, due largely to the
effect of government subsidies to soften the cost of utility
bills for homes.
An index stripping out the effect of both fresh food and
energy, which is closely watched by the BOJ as a better gauge of
underlying price trends, rose 3.8% in March from February's 3.5%
and accelerated for the 10th straight month.
The year-on-year rise in the so-called "core core" index was
the fastest since December 1981, when Japan was experiencing an
asset-inflated bubble economy.
While government subsidies kept utility bills down, prices rose for various daily necessities and food such as fried chicken, which rose 12% and laundry detergent, up 18%, the data showed. Services prices rose 1.8% in March year-on-year, faster than a 1.5% gain in February, with restaurants charging 7.6% more than year-before levels. Persistent rises in global commodity prices have prodded many Japanese companies, long reluctant to hike prices, to finally pass on their higher costs to consumers, pushing up consumer inflation to well above the BOJ's 2% target. New BOJ Governor Kazuo Ueda has vowed to keep monetary policy ultra-loose until there is more evidence the rise in inflation has become sustainable and driven by strong demand rather than supply pressures. At Ueda's first policy-setting meeting next week, the BOJ is widely expected to make no major changes to its bond yield control policy, say sources familiar with its thinking. Markets are focusing on the BOJ's quarterly outlook report due after the meeting, which will include inflation forecasts extending through fiscal 2025. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Japan's core inflation remains above BOJ target ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Leika Kihara and Takahiko Wada; Editing by Shri Navaratnam)
Messaging: leika.kihara.reuters.com@reuters.net))