Japan's core inflation rate rose to 2.1% in September, the highest level of the year so far, slightly higher than analysts' expectations. This is due to persistently high energy prices and the weakening yen, which has led to increased import costs.
The core inflation rate, after excluding the prices of fresh food, is in line with the forecast of 2.1% given by economists surveyed by Reuters, and has accelerated from 1.7% in the previous month. The overall inflation rate is 2.1%; while the so-called "core of the core" inflation – which excludes the prices of fresh food and energy, and is also the indicator favored by the Bank of Japan – is 2.4%.
Higher inflation may prompt the Bank of Japan to raise interest rates again this year. Previously, the Bank of Japan raised rates by 25 basis points in September, and as the bank gradually normalizes its monetary policy after decades of reflationary policies, interest rates have been raised to a 30-year high of 1.25%.
According to reports, Japanese Finance Minister Masayuki Katsumura stated in parliament on Wednesday that Japan "is on the verge of entering a period of sustained inflation driven by rising wages," while also acknowledging that higher import costs are also contributing to the increase in prices.
As Japan purchases energy from more expensive sources in the United States and reduces its dependence on Middle Eastern suppliers of oil due to the Iran conflict, the cost of oil imports has risen. The weakening of the yen also makes Japan's oil costs higher.
Reuters reported that when Gao Yue Matsuyama was asked by a member of parliament whether the government's tax cut plans would conflict with the central bank's efforts to raise interest rates to curb inflation, she stated, "I don't think there is any disagreement between the views of the government and the Bank of Japan."
On Tuesday, the Japanese House of Representatives began to deliberate on a bill that proposes to reduce the food consumption tax from 8% to 1% for a period of two years. According to reports by Japan's public broadcasting agency NHK, the bill also includes provisions for providing subsidies to workers based on their income levels.
