Japan’s September inflation remained above the Bank of Japan’s 2% target, while disagreement over underlying price pressure leaves the central bank’s next rate decision in focus.
Prices on Japan’s broad consumer index and on the measure excluding fresh food were each 2.1% higher than a year earlier in September. The measure that also excludes energy rose 2.4%, according to the Statistics Bureau of Japan.
In a 7-2 decision on Sept. 18, the BOJ raised its target for the uncollateralized overnight call rate to around 1.25% from around 1%. The change took effect Sept. 24.
The BOJ’s account of its Sept. 17-18 meeting shows policymakers did not share one view on underlying inflation. Some opinions said the available evidence did not establish that inflation had reached 2%; others put it close to or at that level. The summary does not identify the speakers.
A Reuters poll conducted Oct. 13-19 found that 54 of 78 economists expected the rate to reach 1.50% in the fourth quarter. Among those who named a month, roughly four in five picked December and 2% picked October. The results reflect economists’ forecasts, not BOJ guidance.
Reuters, citing people familiar with the BOJ’s thinking, reported that the central bank was expected to hold the rate around 1.25% at its October meeting and might slightly raise its inflation forecast for the next fiscal year. The BOJ has not confirmed those expectations.
BOJ Policy Board member Junko Koeda said in an Oct. 15 speech that the bank should not be “overly cautious” about raising rates. She also noted that most household housing debt is in variable-rate loans linked to prime lending rates and urged the BOJ to assess the accumulated effects of rate increases on household behavior.
The BOJ linked producer-price pressure to high crude-oil prices, yen depreciation and demand related to artificial intelligence. It said consumer prices were reflecting higher business costs and wage increases that companies carried through to their prices.
September services producer prices and core-CPI indicators are scheduled for Tuesday, Oct. 27. The BOJ meets Thursday and Friday, Oct. 29-30; its policy statement and October “Bank’s View” are due Friday, with a full outlook scheduled for Monday, Nov. 2.
