Core inflation in Japan’s capital softened in March but continued to remain above the 2 percent target adding to the dilemma of the Bank of Japan as to how to steer the monetary policy after exiting negative interest rates earlier this month.

Core inflation that excludes fresh food eased slightly to 2.4 percent, as expected, from 2.5 percent in February, data from the Ministry of Internal Affairs and Communications revealed Friday.

Likewise, inflation excluding fresh food and fuel prices, weakened to 2.9 percent from 3.1 percent in the previous month.

Meanwhile, overall inflation rose to 2.6 percent from 2.5 percent in the previous month.

The March Tokyo CPI supports the assessment that the Bank of Japan won’t tighten monetary policy any further, Capital Economics economist Marcel Thieliant said.

Earlier this month, the BoJ had raised its interest rates for the first time since 2007. The overnight interest rate was raised to around 0 to 0.1 percent from minus 0.1 percent.

With stronger-than-expected wage negotiation results for the fiscal year 2024, the central bank’s sustainable inflation growth target is achievable this year, ING economist Min Joo Kang said.

The BoJ will pay more attention to the improvement in retail sales and sticky inflation data than to weak industrial output and labor results driven by an idiosyncratic factor, the economist added.

Official data showed that industrial production dropped 0.1 percent on a monthly basis in March, confounding expectations for an increase of 1.2 percent. Nonetheless, the pace of decline slowed from a sharp 6.7 percent contraction seen in January.

The Ministry of Economy, Trade and Industry said industrial production fluctuates indecisively, but it has weakened. Production is expected to climb 3.3 percent in April.

Another data from the ministry showed that retail sales growth accelerated to 4.6 percent in February from 2.1 percent a month ago.

The Ministry of Internal Affairs and Communications also reported that the jobless rate came in at 2.6 percent in February. The rate was forecast to remain unchanged at 2.4 percent. The number of unemployed people totaled 1.77 million, up 30,000 from the last year.