(Bloomberg) -- Japan’s key inflation gauge edged up in September, bringing the Bank of Japan back to the halfway point toward its price target, though gains are still largely limited to energy.
Key Takeaways
The acceleration in Japan’s inflation backs up Governor Haruhiko Kuroda’s decision Thursday to upgrade his assessment of the current strength of price growth to around 1 percent from a range of 0.5 percent to 1 percent. Yet the renewed momentum still leaves the BOJ a long way from its inflation goal and still reliant on higher energy prices to pull up the overall index. As Kuroda said in a Bloomberg interview last week, the critical element needed to drive inflation toward 2 percent is higher pay that can fuel consumption.
Economist Views
- The breakdown of the data shows that energy prices are still contributing greatly to the gains in CPI, said Kengo Tanahashi, an economist at Nomura Securities. As crude prices rose quite a bit in September and October, energy could keep pushing inflation for some time, he added.
- Consumer spending was firmer in the April-June quarter, but still isn’t showing fundamentally strong growth, Tanahashi said. "Unless spending becomes more fixed around these levels it’s difficult for price hikes to gain more momentum," he said.
- Looking at the latest data showing that prices excluding energy and fresh food are still only rising 0.4 percent, it’s too early for the BOJ to be thinking about an exit strategy, Takuji Okubo, chief economist at Japan Macro Advisors, said on Bloomberg Television.
- Still, the central bank could eventually achieve its goal, he said. "Over time, as unemployment goes down, there has to be a wage pressure so I do think 2 percent inflation will happen if the Japanese economy keeps growing and the Bank of Japan keeps the current aggressive easing policy," he said.
Other details
- Energy prices rose 8.1 percent from a year earlier, boosting overall price growth by 0.6 percentage point.
(Updates economist comments. The headline of an earlier version of this story was corrected.)
