Japan’s core consumer inflation rate accelerated to a fresh
eight-year high of 3.0% in September, exceeding the central bank’s
2% target for the sixth straight month as the yen’s slump to
32-year lows continue to push up import costs, Trend reports citing
Reuters.
The inflation data highlights the dilemma the Bank of Japan
faces as it tries to underpin a weak economy by maintaining
ultra-low interest rates, which in turn are fuelling an unwelcome
slide in the yen that pushes up import costs.
The increase in the nationwide core consumer price index (CPI),
which excludes volatile fresh food but includes fuel costs, matched
a median market forecast and followed a 2.8% rise in August. It was
the fastest pace of gain since September 2014, data showed on
Friday.
The broadening price pressures in Japan and the yen’s tumble
below the key psychological barrier of 150 to the dollar will
likely keep alive market speculation of a tweak to the Bank of
Japan’s dovish stance over coming months.
“The current price rises are driven mostly by rising import
costs rather than strong demand. Governor Kuroda may maintain
policy for the rest of his term until April, though the key is
whether the government will tolerate that,” said Takeshi Minami,
chief economist at Norinchukin Research Institute.
The data heightens the chance the BOJ will revise up its
consumer inflation forecasts in new quarterly forecasts due at next
week’s policy meeting, analysts say.
An index stripping away both fresh food and energy costs, which
the BOJ closely watches as a key gauge of the underlying strength
of inflation, rose 1.8% in September from a year earlier,
accelerating from a 1.6% gain in August.
With Japan’s inflation still modest compared with price rises
seen in other major economies, the BOJ has pledged to keep interest
rates super-low, remaining an outlier in a global wave of monetary
policy tightening.
Discussion about this post