Japan's Headline CPI Artificially Subdued by Govt Measures -- Market Talk

Dow Jones03-24

0106 GMT - Japan's inflationary pressures are more entrenched than February's headline result suggests, says Capital Economics' Abhijit Surya. CE thinks the BOJ's preferred measure of core inflation will remain above target for the foreseeable future, cementing the case for policy tightening. Generous electricity and gas subsidies drove the cooling in headline inflation. Those subsidies lapse in April, but the government could extend them, Surya says. It is already cushioning consumers from the global energy surge by capping prices of refined petroleum products. Combined with the abolition of the gas tax surcharge, that should keep a lid on energy inflation. CE is also confident that services inflation will gain traction, as wage momentum seems increasingly structural. If so, the BOJ will hold faith in the virtuous wage-price cycle and can hike next month. (fabiana.negrinochoa@wsj.com)

(END) Dow Jones Newswires

March 23, 2026 21:06 ET (01:06 GMT)

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CE thinks the BOJ's preferred measure of core inflation will remain above target for the foreseeable future, cementing the case for policy tightening. Generous electricity and gas subsidies drove the cooling in headline inflation. Those subsidies lapse in April, but the government could extend them, Surya says. It is already cushioning consumers from the global energy surge by capping prices of refined petroleum products. Combined with the abolition of the gas tax surcharge, that should keep a lid on energy inflation. CE is also confident that services inflation will gain traction, as wage momentum seems increasingly structural. If so, the BOJ will hold faith in the virtuous wage-price cycle and can hike next month. 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