Danske Research Team notes softer Japanese data, with composite PMI slipping and core CPI falling below target for the first time in four years, largely due to fuel subsidies. Despite this, PMIs show rising input prices and a weak Japanese Yen. Danske Bank expects the next Bank of Japan rate hike in April, with markets pricing roughly a 50% probability.

Soft inflation but hike still in view

"In Japan, data has come in on the soft side, with composite PMI at 52.5 down from 53.9, driven by both manufacturing and service."

"CPI inflation, excluding fresh food, declined to 1.6% in February from 2.0%, marking the first time below the inflation target in four years."

"Fuel subsidies is a key driver, and the reality has changed a lot since February as PMIs reveal a marked increase in firms' input prices and the yen remains under pressure."

"We expect the next BoJ hike in April."

"Markets are pricing close to 50-50 for that."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)