Japan's September CPI Rises 2.1%... Exceeding BOJ's "Price Stability Level" of 2%

Ministry of Internal Affairs and Communications announcement
Likelihood of a December rate hike rises

Japan's consumer price inflation in September exceeded the Bank of Japan's (BOJ) 2% price stability target.

According to Japan's Ministry of Internal Affairs and Communications on the 23rd, the Consumer Price Index (CPI) stood at 102.3 in September on an index excluding volatile fresh food, up 2.1% from the same month a year earlier. This was 0.4 percentage points higher than the 1.7% increase in August.

Excluding fresh food and energy, the index stood at 102.8, up 2.4% year on year. Food prices excluding fresh food rose 2.9%.

Bank of Japan Governor Ueda Kazuo speaks after the monetary policy meeting in Tokyo, Japan, on the 18th of last month. Tokyo, Japan = Reuters-Yonhap.

Green tea prices rose 33.8%, the steepest increase since comparable data became available in 1971. The increase was attributed to rising demand and declining production.

Inflationary pressure also appeared to be spreading across a broad range of goods and services. Goods prices rose 2.8% year on year in September, accelerating from 2.6% in August. Service price inflation also increased from 1.2% to 1.5% over the same period. Reuters noted that this suggests companies are passing higher labor costs on to service prices amid labor shortages in the job market.

Energy prices appeared to be held down by fuel subsidies. Japan's energy prices fell 0.6% in September, while gasoline prices declined 2.6%. Since March, the Japanese government has been subsidizing oil wholesalers in response to instability in the Middle East and keeping retail prices at 170 yen per liter.

Electricity prices also fell 2.4%, as the Japanese government provided households with subsidies for energy costs during the summer months of July through September.

However, with inflation exceeding the BOJ's target, the likelihood of a BOJ rate hike has increased. The Nikkei reported on the 23rd that the BOJ is likely to raise interest rates at its December monetary policy meeting.

This content was produced with the assistance of AI translation services.