Volkswacht Bodensee - Japan's core inflation rate slows to 3% in Feburary

The core Consumer Price Index (CPI) slowed from 3.2 percent in January, remaining above the Bank of Japan's two-percent target which has been exceeded every month since April 2022.

Government subsidies for electricity and gas fees contributed to the easing in inflation, the internal affairs ministry said.

February's core reading narrowly beat market expectations of 2.9 percent.

Rising prices for petrol, food and accommodation among other necessities have been squeezing Japanese households.

Overall, when volatile fresh food was included, prices in February were up 3.7 percent year-on-year -- among the highest rate in the Group of Seven -- exceeding market expectations of 3.5 percent, but slowing from 4.0 percent in January.

The sticker shock was strong for cabbage, whose price rose 130 percent year-on-year, the data showed, after last year's record summer heat and heavy rain ruined crops.

Rice prices were up 81 percent, chocolate was up 30 percent and coffee beans were nearly 23 percent more expensive.

Earlier this month, the government began a rare auction of its emergency rice stockpiles in a bid to help drive down the surging price of the national staple.

Japan has previously tapped into its reserves during disasters, but this was the first time since the stockpile was created in 1995 that supply chain problems have prompted the move.

Prime Minister Shigeru Ishiba's minority government is struggling to gain strong support from voters who were already angry over inflation and other issues when Ishiba took office in October.

Approval ratings for Ishiba's cabinet have dropped sharply in recent days as the leader faces a backlash for distributing expensive gift vouchers to rookie ruling-party lawmakers -- a move Ishiba says was legal and not a political donation.

On Wednesday, the Bank of Japan left its key interest rate unchanged, warning about the economic outlook amid global uncertainty fuelled by US President Donald Trump's trade war.

The BoJ is aware that rising prices "are contributing negatively to people's lives", governor Kazuo Ueda told reporters.

"A rise in food prices, including rice... can affect the basic pace of inflation through a change in households' mindset and expectation of future inflation," he said.

T.Suter--VB