MNI BRIEF: Japan Oct Core CPI Rises 2.3%, Services Rise
MNI (TOKYO) - The year-on-year rise of Japan's annual core consumer inflation rate slowed to 2.3% in October from September’s 2.4%, 10 basis points higher than expected, due to lower energy, but corporate price revisions boosted services prices, data released by the Ministry of Internal Affairs and Communications showed on Friday.
Services rose 1.5% y/y and 0.4% m/m against September's 1.3% and -0.4% as firms transferred higher labour costs to retail prices. The increase was largely in line with the lower end of the Bank of Japan's forecast. Officials are closely watching the services result to gauge the strength of the wage-price cycle.
October's core CPI result also represents the 31st consecutive month above the Bank's 2% target.
Lower prices of energy (+2.3% vs. +6.0%) and household durable goods (+6.0% vs. +6.5%) weighed on the index. However, food prices excluding perishables rose 3.8% vs. 3.1%. Processed foods, accounting for 15% of the total CPI, also rose 2.2% in October vs. September’s 1.8%, indicating the continued pass-through of cost increases.
The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 2.3% y/y in October, accelerating from September’s 2.1%.
BOJ officials would prefer the board to hike in December, but fear of equity market volatility and political reaction could stay the board's hand when it meets Dec 18-19. (See MNI POLICY: Equities, Politics To Weigh On BOJ's Next Decision)