MNI POLICY: Japan Oct CPI Gain Unchanged; BOJ Still Cautious

--Japan CPI Up 1.0% y/y In October, Unchanged On September

     TOKYO (MNI) - Japan's nationwide consumer price index rose 1.0%

year-on-year in October, unchanged on the previous month and Bank of Japan

officials remain cautious about their inflation outlook.

     The inflation rate remains stubbornly slow in responding to a sustainable

economic expansion and tight labor market conditions, with firms still cautious

about raising retail prices.

     But the BOJ will maintain their view that momentum toward achieving the 2%

price target remains, although it isn't yet sufficiently firm.

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

October, recording the 22nd straight year-on-year rise, following a 1.0% gain in

September.

     --TOKYO LEAD INDICATOR

     The pace of the October Tokyo core CPI, a leading indicator of nationwide

CPI and published earlier in the month, was also unchanged from September at

+1.0%, indicating the pace of October nationwide CPI would be unchanged at 1.0%.

     The rise was mainly led by higher prices for food, excluding perishables,

and overseas holiday tours.

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

rising 8.9% on year in October, following a gain of 8.1% in September. The

contribution to total CPI was 0.67pp, higher than 0.60pp in September.

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

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

from +0.4% in September.

     Meanwhile, BOJ officials were encouraged by higher food prices excluding

volatile fresh food and prices for processed food.

     --EX-FOOD PRICES HIGHER

     Goods prices excluding volatile fresh food prices rose 1.9% on year in

October, with the pace of increase accelerating from September's 1.7% gain. The

pace of increase in overall goods prices was 2.6% in October, accelerating from

a 2.1% gain 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

1.7% on year in October after a 1.5% gain in September, reflecting higher energy

and labor costs.

     Prices for eating out rose 1.0% on year in October, unchanged from

September, indicating that upward pressure on the service prices from higher

labor and material costs continues, 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

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