Japan’s core inflation excluding fresh food rose to 2.1 percent year-on-year in September, up from 1.7 percent in August and above analyst forecasts. It was the highest level so far this year and sits above the Bank of Japan’s 2 percent target. Headline inflation also came in at 2.1 percent.
Finance Minister Satsuki Katayama said Japan is on the verge of a period of sustained inflation driven by wage increases, while acknowledging that rising import costs also pushed up prices. Capital Economics senior Asia Pacific economist Abhijit Surya said the acceleration is noteworthy because it occurs as fresh food price increases slow sharply and energy prices are still deflating.
Energy and import costs
Energy prices fell 0.6 percent in September, helped by subsidies under Prime Minister Sanae Takaichi’s government. Yen weakness has raised import costs, including energy, as Japan’s oil import costs rose amid supply shifts toward the United States and away from the Middle East during the Iran conflict.
Core inflation excluding fresh food and energy was 2.4 percent. Japanese rice prices fell 20.6 percent year-on-year, while inflation in other industrial products rose 3.9 percent, the highest in 13 months.
Rate outlook and tax debate
The Bank of Japan raised its policy rate by 25 basis points to 1.25 percent in September, the highest level in about three decades. Surya expects a possible further hike in December.
Parliament has begun debating a plan to cut the consumption tax on food to 1 percent from 8 percent for two years, according to NHK.
Related: Japan Inflation Rises to 2.1% in September · UK Inflation Rate Hits 3.5% in September
Source: Bank of Japan
