Japan’s consumer price index (CPI) bounced back in March due to a jolt in the price of oil, and economists and analysts see this trend continuing — at least in the near term until the lag of cheap oil filters through to the market.
Harumi Taguchi, principal economist with HIS Global Insight, said in research note that the gain in the CPI is also being bolstered by higher food prices. Taguchi noted this will continue and that “inflationary pressures are likely to remain weak” until wage gains strengthen and the “lagged effects of lower oil prices and the dropout of the impact of the consumption tax increase begins to boost consumer spending.”
The Japanese government said the CPI rose 0.2 percent on a month-to-month basis, which follows two months of declines.
In a separate report from the Bank of Japan, the policy-setting agency left its current monetary policy unchanged — a show of confidence that the country will reach its inflation target of 2 percent in 2016.
Taguchi said the “decision is in line with [our] expectations, and the central bank is likely to maintain the current level of monetary easing unless downside risks strengthen.” Those risks include tax increases and slow-growing inflation – two market forces that also impact consumer spending.