Tokyo Inflation Report: October

Consumer price index inflation in Tokyo eased slightly less than expected in October, despite core inflation dropping below the Bank of Japan’s target due to cooling private spending.

Key Figures

• Core CPI Inflation:
  • 1.8% year-on-year in October (slightly above expectations of 1.7%)
  • Down from 2% in the prior month.
• Core CPI (excluding fresh food and energy):
  • Increased to 1.8% from 1.6%.
• Headline CPI Inflation:
  • Fell to 1.8% in October from 2.2% in the previous month.

Implications

Tokyo's inflation often reflects national trends, and this month's data suggests a slowdown in private spending and price momentum following earlier gains this year.

Recent purchasing managers index data indicated weakened Japanese business activity in October, particularly as local demand decreased. National inflation data from last week also showed cooling through September.

With a BOJ meeting approaching, the central bank is expected to maintain interest rates, coinciding with a general election this Sunday, where the ruling Liberal Democratic Party may need a coalition to stay in power. Concerns regarding inflation slowing and potential government changes have led to increased speculation that the BOJ may not raise interest rates as aggressively as previously anticipated.