MNI POLICY: Japan CPI Accelerates, BOJ Remains Cautious

     TOKYO (MNI) - Bank of Japan officials remain cautious about their inflation

outlook, despite August's acceleration in the year-on-year core consumer price

index.

     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.

     The national average core CPI (excluding fresh food) rose 0.9% on year in

August, recording the 20th straight year-on-year rise. The pace accelerated from

+0.8% in July and June.

     But the gain was mainly due to accommodations (+10.2% on year in August vs

+1.9% in July).

     Energy prices continued to support the recent gradual pickup in inflation,

while the base-year effect of discounts on mobile communications costs remained.

     --EXPECTATIONS

     BOJ officials expected year-on-year core CPI to have accelerated in August,

as core CPI in central Tokyo, a leading indicator of the national CPI, rose 0.9%

in the month, up from +0.8% in July. The next key data release is the Tokyo CPI

for September, due out on Sept. 28.

     In the August national CPI data, BOJ officials were encouraged by higher

goods prices.

     Goods prices excluding volatile fresh food prices rose 1.5% on year in

August, with the pace of increase unchanged from +1.5% in July. The pace of

increase in overall goods prices accelerated to +2.1% in August from +1.7% in

July.

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

which accounts for 15% of the total CPI, rose 1.2% on year in August after +1.3%

in July, reflecting higher energy and labor costs.

--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

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