By Leika Kihara
TOKYO- Japan’s core inflation slowed in September due to the rollout of energy subsidies but an index excluding the effect of fuel held steady, a sign that broadening price pressure will keep the central bank on track to raise interest rates further.
A Reuters poll, however, showed inflation in Tokyo – seen as a leading indicator of nationwide trends – likely fell below the Bank of Japan’s 2 percent target in October.
Tepid services inflation also casts doubts on the central bank’s view that solid wage growth will support consumption and keep inflation durably around its 2 percent target.
The data will be among factors the Bank of Japan (BOJ) will scrutinize at this month’s policy meeting, when the board releases fresh quarterly growth and price forecasts.
“Falling global commodity prices and the yen’s rise will likely lower food prices down the road,” said Junichi Makino, chief economist at SMBC Nikko Securities.
“Services inflation as a whole will continue to stagnate,” he said, predicting nationwide core inflation to fall below 2 percent in October.
Japan’s core consumer price index (CPI), which includes oil products but excludes fresh food prices, rose 2.4 percent in September from a year earlier, data showed on Friday, compared with a median market forecast for a 2.3 percent gain.
The slowdown from a 2.8 percent rise in August was due largely to the government’s rollout of temporary subsidies to curb utility bills, which will weigh on inflation in coming months.
An index stripping away the effects of fresh food and fuel, which is closely watched by the BOJ as a better indicator of demand-driven price moves, rose 2.1 percent in September year-on-year after a 2.0 percent gain in August. – Reuters
