According to the Ministry of Internal Affairs and Communications, while also marking the largest growth since January 2020, energy prices have surged the most in over 40 years, with the core consumer price index, excluding volatile fresh food items, increasing year-on-year for the seventh straight month.
Higher prices for crude oil and other energy costs, such as liquefied natural gas, saw the core CPI elevated by 0.1 percent in fiscal 2021 through March, marking the first increase in two years, the statistics bureau said.
The Bank of Japan's (BOJ) once-lofty goal of achieving a 2-percent inflation rate may happen sooner than expected, some analysts said, owing to the increasing core CPI as a key indicator of inflation.
A ministry official was quoted as saying that the effect of significantly lower mobile phone fees on a year-on-year basis falling out of the inflation data would help the headline figure increase by about 1 percent.
As for the yen's rapid decline of late, while being a boon for some exporters to boost competitiveness and profits made overseas when repatriated, firms here importing raw energy materials and commodities to power resource-poor Japan are facing difficulties meeting surging prices which are hard to pass on to consumers as wage increase has remained largely stagnant.
Market strategists here have also highlighted the downside effects of continued volatility in the currency market, with the yen plunging to a number of fresh 20-year lows versus the U.S. dollar recently.
The yen's depreciation has caused Bank of Japan (BOJ) Governor Haruhiko Kuroda to say that recent sharp declines of the Japanese yen could negatively impact Japanese firms' earnings outlooks and the nation's already struggling economy.
The BOJ chief has said that it is more desirable that currencies move stably reflecting economic fundamentals, with his assessment of recent volatility in the currency markets coming amid growing concerns over the impact this could have on Japan's fragile economy.
Rising U.S. Treasury yields have been prompting market players to offload the Japanese currency, with the move compounded by the prospect of a widening monetary policy gap between Japan and the United States
This is due to the U.S. Federal Reserve's tightening of its policy to combat inflation and its suggestion of further rate hikes this year.
The Fed's aggressive moves compare to the BOJ maintaining its ultra-loose monetary easing policy position, which has long been underpinned by the bank's overall dovish stance on monetary policy, in contrast to other central banks.
In contrast to the Fed's stance, Kuroda believes the current commodity inflation will pass and his stance on maintaining the central bank's powerful monetary easy policy remains unwavering.
According to the ministry, energy prices have surged 20.8 percent, the largest rise since 1981, while prices for kerosene have soared 30.6 percent.
Gasoline prices have climbed 19.4 percent, though the increases were apparently curbed by government subsidies to wholesalers, sources with knowledge of the matter said.
Japan's core-core CPI, meanwhile, excluding both fresh food and energy prices, dipped 0.7 percent in the recording period, marking the 12th month of decline.
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