Japan's Consumer Price Index Inflation in September

Japan's consumer price index (CPI) inflation grew slightly more than expected in September, as underlying inflation remained persistent. However, the headline figure fell from its 10-month highs.

Key Data

• Core CPI, excluding volatile fresh food items, increased by 2.4% year-on-year in September, higher than the expected 2.3%, yet down from 2.8% in the previous month.
• A core reading, excluding both fresh food and energy prices monitored by the Bank of Japan (BOJ), rose to 2.1% in September from 2% in the previous month.
• Headline CPI inflation decreased to 2.5% from 3% in the prior month.

Economic Implications

This report arrives amid uncertainties regarding the BOJ's capability to continue raising interest rates, as private spending seems to be slowing after strong growth earlier this year.

Leadership Changes and Interest Rates

Recent changes in Japan’s leadership may also hinder the BOJ’s plans to implement rate increases. Newly appointed Prime Minister Shigeru Ishiba stated that Japan is not ready for another hike.

Despite these challenges, the rise in underlying inflation indicates that inflation is likely to remain around the BOJ's 2% target. Inflation has steadily increased this year due to significant wage hikes from Japanese unions, bolstering consumption.
The BOJ maintained steady interest rates during a September meeting but expects inflation to remain persistent, aiming for a sustainable reach of its 2% annual target rate.