By Leica Kehra
TOKYO (Reuters) – Japan’s core inflation in October was above the central bank’s 2 percent target and an index quickly eliminated the fueling effect, data showed on Friday, with the central bank now Even lower interest rates kept up the pressure.
The data also showed a steady rise in service prices, which are closely watched by the Bank of Japan (BOJ) for signs of whether firms are experiencing rising labor costs. suggesting that conditions are falling for further rate hikes.
The readings will be among the factors the BOJ will discuss at its next policy meeting on Dec. 18-19, when some analysts expect short-term rates to rise by 0.25% to 0.5% as the central bank continues to raise interest rates for years. Very low rates are being eliminated. .
The nationwide core consumer price index, which includes oil products but excludes fresh food prices, rose 2.3 percent in October from a year earlier, government data showed, the market average of a 2.2 percent increase. is slightly higher than predicted.
This slowed from a 2.4 percent increase in September, largely due to the main effect of the government’s decision to halve last year’s fuel subsidy that raised prices from October 2023.
A separate index that strips out the effect of volatile fresh food and fuel, which the BOJ examines as a better gauge of demand-driven inflation, rose 2.3% in October from a year earlier, in September. Accelerated by an increase of 2.1%.
Services inflation also rose to 1.5 percent in October from 1.3 percent in the previous month, suggesting rising wages are forcing more firms to raise prices.
“All things considered, however, the recent recovery in consumer spending, along with renewed strength in core inflation and renewed weakness in the yen, should lead to another BOJ rate hike next month,” said Marcel Thieliant, head of Asia Pacific at Capital Economics. strengthens the case.” .
The CPI data has drawn close attention because many Japanese firms typically charge prices for services in April, which is the start of the fiscal year, and October.
The yen and bond yields rose on Thursday on expectations that the BOJ could raise rates in December, after Governor Kazuo Yoda said the bank would review “a lot of data and information” ahead of the meeting.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July as Japan moved closer to permanently achieving its 2% inflation target.
Ueda stressed the BOJ’s readiness to raise rates again if Japan makes progress in achieving its price target in a sustained manner, supported by sustained growth in domestic demand and wages.
A slim majority of economists polled by Reuters polled Oct. 3-11 predicted the BOJ would hold off on raising rates this year, though about 90 percent expected a rate hike by March.
