Tokyo, Japan – Inflation in Japan reached 3.6% in March, exceeding the Bank of Japan’s target for the third consecutive year. However, this figure was slightly lower than the 3.7% recorded in February. The core inflation rate, which excludes fresh food and energy prices, rose to 2.9% from 2.6% the previous month. Additionally, core inflation, excluding fresh food prices, landed at 3.2%, consistent with predictions from Reuters, compared to a 3% increase in February.

The release of this data coincides with ongoing trade negotiations between Japan and the United States. President Donald Trump mentioned progress in these talks, despite recent tariffs being imposed on Japanese imports. Trump decided to suspend reciprocal tariffs of 24% on Japan, with a new base tariff of 10%. These tariffs could potentially impact Japan’s GDP, limiting the Bank of Japan’s ability to raise interest rates and normalize monetary policy.

Analysts at Nomura adjusted their projections in response to the tariffs, forecasting a single rate hike by the Bank of Japan rather than the initially expected two. They only anticipate a rate hike in January 2026 now. The impact of these tariffs may cause Japan’s GDP to stagnate in the third quarter of 2025. This economic uncertainty could also affect wage growth, making it challenging for the Bank of Japan to raise rates during future wage negotiations in 2026.

The looming threat of tariffs from the United States presents a complex situation for Japan’s economy. It remains to be seen how policymakers will navigate through these challenges to ensure economic stability and growth in the coming years. The decisions made in the upcoming months will play a crucial role in shaping Japan’s economic landscape and its relationship with the global market.