Japan’s core prices rise 2.1% in September, back above BoJ’s goal
Japan's core consumer prices rose 2.1% year-on-year in September, matching forecasts and climbing back above the Bank of Japan's 2% objective for the first time since December. The yen strengthened on the news.
Headline inflation moved in step, also gaining 2.1% versus a year ago and up from 1.9% in August, matching consensus. More telling for rate-setters was the core-core gauge, which excludes both fresh food and energy and functions as Japan’s nearest equivalent to the US core inflation measure – it jumped to 2.4%, beating the 2.3% consensus and well above the 1.9% recorded a month earlier.
These countrywide numbers were softer than what Tokyo had already posted earlier in October, when its core reading hit 2.7% and the ex-food-energy gauge climbed to 3.0%, a spike partly linked to the lapsing of some local subsidy programs. Nationally, electricity subsidy support is still masking the true scale of price growth, meaning cost pressures away from energy could be running hotter than the headline 2.1% figure suggests.
The fresh numbers strengthen the rationale for the Bank of Japan to deliver another rate increase before year-end. The central bank pushed its policy rate up to 1.25% in September, though two board members opposed the move, arguing inflation had not yet climbed enough. Speaking to lawmakers this week, BoJ Governor Kazuo Ueda said underlying price growth was now running close to the bank’s goal.
Despite the stronger-than-anticipated figures, Japan’s Economy Minister Minoru Kiuchi said the administration is not ready to formally announce the end of deflation, noting that any such call would need to weigh consumer prices, the GDP deflator, and the broader drivers shaping underlying inflation trends.
The BoJ’s next policy meeting runs October 29-30, where officials are widely expected to leave rates unchanged, though they could lift their inflation outlook and indicate that underlying price growth has essentially met the 2% threshold – language that would keep the door open for a hike in December.
Why it matters: The stronger Japan core CPI print adds to expectations of further BoJ tightening, a trend that typically narrows the US-Japan rate differential and supports the yen against the dollar. This carries direct consequences for USD/JPY and for shorter-dated Japanese government bonds, which react most strongly to shifts in rate expectations.
Source: investingLive