Japan’s core consumer price index, which excludes temporary factors like government subsidies, reached its highest annual growth rate in three years in September. The data, released on Tuesday, showed a 3.2% year-on-year increase, up from 2.6% in August. This marks the steepest rise since October 2023, reinforcing expectations that the Bank of Japan (BOJ) will continue raising interest rates to combat inflation.
The index, compiled by the BOJ to measure underlying inflation, differs from the government’s core consumer price index by stripping out the impact of subsidies and other one-off measures. Separate data from the BOJ also revealed that a key gauge of service-sector inflation rose 3.7% in September, indicating that businesses are transferring rising labor costs to service-related prices.
Kenichiro Ahara, an economist at Dai-ichi Life Research Institute, noted that the data reflects the strong outcome of this year’s wage negotiations, with companies passing on higher costs at the business-to-business level. The annual rise in the services producer price index followed a revised 3.5% gain in August, driven partly by a 97.7% surge in ocean freight transport costs due to the weak yen and Middle East conflict.
The BOJ is set to keep interest rates steady at 1.25% during its two-day policy meeting ending on Friday but is expected to signal further rate hikes. The central bank has emphasized its focus on underlying inflation in determining the timing and pace of future rate adjustments.