Japan’s headline inflation likely eased in March, BoJ to stay committed to current monetary policy stance

Japan’s economic conditions have evidently strengthened in the past few quarters. The nation has recorded its longest period of uninterrupted growth since the 1986 expansion, and headline and core inflation have risen from recent lows. This rebound, along with slowly tightening monetary policy elsewhere in the developed world, has led some to begin questioning when the Bank of Japan might begin the process of unwinding its extraordinary easing.

Bank of Japan Governor Haruhiko Kurudo stated at a news conference recently that the central bank would “need to eventually consider kicking off a process towards policy normalization”. However, for now, inflation continues to be well short of the central bank’s 2 percent target, as it has for much of the last two decades.

Given the structural economic challenges in Japan and the continued gulf between realized inflation and the 2 percent target, the Bank of Japan is expected to stay committed to its current monetary policy stance for the near future, noted Wells Fargo in a research report. The headline inflation is expected to have eased to 1.2 percent in March from 1.5 percent recorded in the prior month, added Wells Fargo.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Japanese Yen was slightly bullish at 69.4975, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 2.18263. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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