–Exports Likely Remain Resilient in March Trade Data, Inflation Seen Tame Below BOJ’s 2% Target but High Price Levels Still Hurt
By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week. The Bank of Japan’s media communications blackout period starts on Wednesday, three business days before the next policy meeting on April 27-28.
There have been hardly any public speeches by the bank’s nine policymakers since the last meeting on March 18-19 when the board decided in an 8 to 1 vote to leave the target for the overnight interest at 0.75%, still below what is considered to be neutral to economic activity (somewhat above 1% for Japan).
Previously, the bank left the policy rate unchanged in an 8 to 1 vote in January after conducting its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high in a unanimous vote.
The only speech published by the BOJ is a brief statement by Governor Kazuo Ueda read out by one of his two deputies at an annual meeting of the Trust Companies Association of Japan on April 13. (Toihicro Asada, a retired economics professor, held a news conference on April 1 as he joined the board but his remarks were mostly general and he avoided answering crucial questions.)
Ueda said the recent spike in global energy and commodities prices triggered by the Mideast conflict could raise both upside risks to inflation and downside risks to growth, a common issue for major central banks, but he seems to be slightly more concerned about the risk of an undesirable rise in prices.
“If downward pressure is placed on the economy and the supply-demand gap widens, this could push down the underlying inflation rate,” he said.
“On the other hand, if rising crude oil prices lead to an increase in people’s medium- to long-term inflation expectations, this is likely to push up the underlying rate of inflation,” the governor said. “Given that firms have become more assertive in their wage and pricing behavior in recent years, it is important to note that this inflationary mechanism may be stronger now than in the past,” he said, repeating the recent official line in the bank’s quarterly Outlook Report (the next issue will be out on April 28).
The summary of opinions from the last policy meeting released on March 30 also explains what risks board members were focusing on and what policy steps they thought the bank should take.
The recent rise in interest rates is not the main reason for firms to put their capital investment plans on hold but widespread labor shortages and elevated costs for materials are hampering a smooth investment in upgrading factories and offices, one member said, according to the summary based on notes submitted by board members and edited by the governor.
Another member summarized what’s next for the board: “The timing for raising the policy interest rate will be determined by assessing factors such as developments in wages, prices, and financial conditions, in addition to the impact of the situation in the Middle East.”
“Specifically, from the next MPM onwards, it will be appropriate to assess in detail whether financial conditions remain accommodative after the last rate hike, while examining how wage and initial price hikes are spreading,” the member said (bold by Mace News).
Among the warnings about the upside risk to inflation, one member said, “Firms’ wage- and price-setting behavior has become more active, with the norm for prices changing and the pass-through of the yen’s depreciation becoming more pronounced.”
“Against this background, there is a risk that the bank may unintentionally fall behind the curve, since the second-round effects and the rise in underlying inflation that stem from overseas developments are more likely to emerge,” the member said. “While uncertainties due to the rise in crude oil prices may exert downward pressure on economic activity over time, the bank should focus for the
time being on addressing higher prices driven by the second-round effects and the rise in inflation expectations.”
Monday, April 20
1330 JST (0430 GMT/0030 EDT Monday, April 20) The Bank of Japan releases the quarterly survey on consumer sentiment, inflation expectations.
Tuesday, April 21
1500 JST (0600 GMT/0200 EDT Tuesday, April 21) The Bank of Japan releases the quarterly financial system report.
Wednesday, April 22
0850 JST (2350 GMT/1950 EDT Tuesday, April 21) The Ministry of Finance releases March, fiscal 2025 merchandise trade.
Mace News median: exports +11.2% y/y (range: +8.9% to +14.2%) vs. revised +4.0% in Feb; imports +5.7% y/y (range: +3.0% to +10.1%) vs. revised +10.3% in Feb; trade surplus ¥1.11 trillion (range: a surplus of ¥530.60 billion to a surplus of ¥1,620.00 billion) vs. a revised ¥44.30 billion surplus in Feb; ¥529.81 surplus in March 2025
Japan’s export values are forecast to post their seventh straight rise on year in March, with the pace of increase recovering to 11.2% after slowing to a revised 4.0% in February, which was in payback for rush shipments to Asia before the Feb. 17 Lunar New Year that saw overall January exports jump 16.8%.
The double-digit percentage gain was likely driven by non-ferrous metals and computer chips as seen in recent months. Japanese carmakers and steel mills are weathering stiff U.S. import duties.
Import values are expected to mark a second straight rise, up 5.7%, after rising a revised 10.3% in February and falling 2.4% in January. The solid increase is seen led by purchases of telecommunications equipment (smartphone), computers chips and non-ferrous metals.
The trade balance is estimated to come to a surplus of ¥1.11 trillion for a fourth positive figure in 12 months after recording a downwardly revised ¥44.30 billion surplus the previous month. It compares with a ¥529.81 billion surplus seen in March 2025.
Wednesday, April 22
1400 JST (0500 GMT/0100 EDT Wednesday, April 22) The Bank of Japan releases the March real trade indexes.
Thursday, April 23
TBA (usually after 1700 JST/0800 GMT/0400 EDT) The Cabinet Office releases the government’s monthly economic report for April. Japanese policymaker remain cautiously optimistic about their gradual economic recovery scenario but last month they warned that the Mideast war is now the biggest source of global uncertainty while downgrading its view on the U.S. economy for the first time in 10 months.
In its monthly report for March, the government basically maintained its core assessment but shifted its focus from the drag from stiff Trump tariffs, saying that the economy is “recovering at a moderate pace but the impact of the situation in the Middle East needs a close attention.” This overview is expected to be little changed in the April report.
Friday, April 24
0830 JST 0830 JST (2330 GMT/1930 EDT Thursday, April 23) The Ministry of Internal Affairs and Communications releases March, fiscal 2025 average CPI.
Mace News median: total CPI +1.4% y/y (range: +1.2% to +1.6%) vs. Feb +1.3%; core CPI (ex-fresh food) +1.6% y/y (range: +1.5% to +1.9%) vs. Feb +1.6%; core-core CPI (ex-fresh food, energy) +2.4% y/y (range +2.3% to +2.5%) vs. Feb +2.5%
Japan’s consumer inflation is expected to remain tame below the Bank of Japan’s 2% target in two of the three key measures in March as renewed subsidies for electricity and fuels continue to ease the upward pressure from a spike in global energy prices amid the lingering Mideast conflict. The BOJ now releases its own core CPI measure that excludes fiscal measures and other one-off factors like mobile phone charge discounts, in hopes of keeping inflation expectations around 2% alive that would allow the bank to continue raising interest rates gradually as part of its policy normalization.
Processed food markups have also been moderating in tandem with fading effects of domestic rice supply shortages, although the level of prices remain high, hurting the purchasing power of many households.
The year-on-year increase in the core CPI (excluding fresh food) is forecast at 1.6% after having eased to a nearly four-year low of 1.6% in February from 2.0% in January. It remains the lowest since 0.8% in March 2022.
The annual rate of the total CPI is seen ticking up to 1.4% after moderating to 1.3% and decelerating sharply to 1.5% in January. The prices of fresh vegetables and fruits as well as rice surged in early 2025 on poor crops of 2024 but have now shown a pullback, cooling off the overall inflation rate.
Underlying inflation, as measured by the core-core CPI that excludes both fresh food and energy, is estimated at 2.4% after unexpectedly edging down to 2.5% in February from 2.6% the previous month.