Japan core inflation hits 2.4% as BOJ weighs next rate move

The Bank of Japan’s closely watched gauge of demand-driven price pressures accelerated significantly last month. Core consumer inflation, which strips out volatile fresh food items but retains fuel costs, climbed to 2.1 percent on an annual basis in September. This figure aligned with market consensus estimates and marked a sharp increase from the 1.7 percent recorded in August.

Underlying Price Pressures Mount

A broader measure that excludes both fresh food and fuel surged by 2.4 percent year-on-year in September, up from 1.9 percent the previous month. The central bank monitors this specific index to better isolate underlying inflationary trends driven by domestic demand rather than external commodity shocks.

Several structural factors have diluted the impact of government subsidies linked to fuel costs. These include rising energy expenses stemming from the prolonged conflict in the Middle East, increased import prices due to the yen’s weakness, and upward pressure on goods caused by robust demand for artificial intelligence technologies.

Monetary Policy Outlook

Following its decision to raise interest rates last month, the Bank of Japan is scheduled to maintain its current monetary policy stance unchanged next week. However, sources told Reuters that the institution may revise its inflation forecasts upward. Such a move would signal readiness to continue increasing borrowing costs, which remain historically low despite recent adjustments.