MNI POLICY: Japan CPI Accelerates; BOJ Cautious View Intact

     TOKYO (MNI) - The year-on-year rise in Japan's nationwide consumer price

index accelerated in September from the previous month, but Bank of Japan

officials remain cautious about their inflation outlook as the pace of price

gains is still slow.

     BOJ officials maintain the view that the inflation rate is still slow

responding to a sustainable economic expansion and the tightness of labor market

conditions, as firms remain cautious about raising retail prices.

     The national average core CPI (excluding fresh food) rose 1.0% on year in

September, recording the 21st straight year-on-year rise, following +0.9% in

August.

     But energy prices continued to support the recent gradual pickup in

inflation as energy prices rose 8.1% on year September, following a 7.4% gain in

August. The contribution to total CPI was 0.60 point, higher than 0.55 points in

August.

     The core-core CPI (excluding fresh food and energy) -- a key indicator of

the underlying trend of inflation -- rose 0.4% on year in September, unchanged

from August's level.

     --IN LINE

     Higher core CPI was expected, as the Tokyo core CPI, as a leading indicator

for the nationwide price data, rose 1.0% in September, up from 0.9% in August.

     BOJ officials were encouraged by higher food prices excluding volatile

fresh food and prices for processed food.

     Goods prices excluding volatile fresh food prices rose 1.7% on year in

September, with the pace of increase accelerating from August's 1.5% gain. The

pace of increase in overall goods prices was unchanged from August at 2.1% in

September.

     Prices for processed food (canned food, bread, snacks, beverages, etc.),

which accounts for 15% of the total CPI that BOJ officials are focused, rose

1.5% on year in September after a 1.2% gain in August, reflecting higher energy

and labor costs.

     Prices for eating out rose 1.0% on year in September, slowing from 1.1% in

August, indicating that upward pressure on the service prices from higher labor

and material costs continued but hasn't increased.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$]