Core inflation in Japan dropped dramatically in February after reaching a 41-year high the previous month, official data showed on Friday, mainly due to the aggregate effect of government subsidies to reduce electricity prices.
Core consumer price index (CPI) fell from 4.2% in January to 3.1% year over year in February, in line with forecasts from a Reuters poll of analysts.
As businesses passed on rising costs to consumers, inflation remained well above the Bank of Japan’s 2% target, fueling hopes in the market that the central bank will soon alter its ultra-loose monetary policy.
Overall, nationwide inflation was 3.3% in February compared to a year ago, which was lower than the 4.3% recorded in January.
Excluding volatile categories like fresh food and energy, the country’s core consumer price index increased 3.5% month over month.
