Japan's Inflation Eases from 2-Year High but Stays Elevated, Nikkei 225 Extends Weekly Gains

Akira Ito
21 Mar, 2025
Tokyo

Benchmark indexes in Tokyo closed mixed as investors returned from a mid-week holiday and reacted to monetary policy decisions from major central banks. 

The Nikkei 225 stock average closed down 0.2%, but the broader TOPIX advanced 0.3%, as investors reviewed the latest inflation data. 

Consumer price inflation in February eased to 3.7% from a two-year high of 4% in the previous month, the Ministry of Internal Affairs and Communications reported Friday. 

The pace of inflation slowed after the government resumed subsidies for electric prices.

Consumer price inflation excluding fresh food slowed to 3.0% from the 19-month high of 3.2% in January.

Despite the slight decline in inflation, prices rose faster than the BoJ's target rate of 2% for the 35th month in a row.

Moreover, the core rate of inflation, which excludes food and energy prices, rose 2.6%, the highest rate in a year.

The persistent shortage of skilled labor, falling yen, and inclement weather are driving prices of food and services higher and supporting the underlying inflation.

Investors in Tokyo reacted to monetary policy decisions released over the last two days. 

The Federal Reserve, the Bank of England, and Sweden's Riksbank held rates steady, but the Swiss National Bank lowered its key lending rate by 25 basis points. 

Moreover, China held its 3-year and 5-year loan prime rates unchanged, denting the expectations of a rate cut. 

Fed Chair Jerome Powell suggested that the U.S. tariffs are likely to be "transitory" on overall inflation, but the central bank lowered its annual economic growth estimate to 1.7% from 2.1% released in December.

Japanese investors are hoping that the Bank of Japan is ready to hike rates after the policy meeting in June and may continue with additional hikes at a gradual pace over the next year till the rates are restrictive. 

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average declined 0.2% to 37,677.06, and the broader TOPIX rose 0.3% to 2,804.16.

For the week, the Nikkei 225 stocks average gained 2.2%, and the TOPIX rose 3.7%.

Japan Airlines Co. Ltd. rose 1.1% to ¥2,678.0, and the company retained its full-year profit and dividend outlook but lowered its revenue forecast to 1.84 trillion yen.

Mercari Inc. advanced 7.5% to ¥2,633.50, and the operator of the e-commerce platform extended this year's gains to 53%. 

Shipping companies traded down amid worries of slowing shipment growth ahead of the U.S. tariffs on goods from Asia and the European Union. 

Kawasaki Kisen Kaisha declined 1% to ¥2,172.0, Nippon Yusen fell 1% to ¥5,230.0, and Mitsui OSK Lines fell 0.5% to ¥5,483.0.