Inflation in Tokyo slowed for a third straight month in September, supporting the Bank of Japan's view that prices are set to cool further.
Consumer prices excluding fresh food rose 2.5% in the capital, decelerating from 2.8% in August, according to the ministry of internal affairs Friday. Economists had forecast a reading of 2.6%.
A deeper measure of the inflation trend that strips out fresh food and energy prices decelerated to 3.8%, slowing for the first time in three months. Tokyo data is a leading indicator of the national trend.
Behind the steady slowdown is lower commodity prices, the impact of which emerged with some delay. The government's decision to extend and expand utility subsidies also helped reduce the overall inflation figure by 0.9 percentage point.
Tokyo data is a leading indicator of the national trend, suggesting the country's inflationary momentum is also likely to continue softening going forward.
Price developments continue to be a major concern for the country's central bank. The bank will likely need to revise up its price outlook when it meets in October, as inflation has remained stronger than initially anticipated.
In its latest outlook report released in July, the BOJ saw its key price gauge averaging 2.5% for the year ending in March, expecting gains to moderate toward year-end.
BOJ Governor Kazuo Ueda re-emphasized last week at his post-meeting press conference that the goal of achieving 2% inflation accompanied by wage gains has not yet come into sight, citing high uncertainties for the economy and price trends.
The data firm Teikoku Databank says that consumers are increasingly weary of rising food costs, but price hikes may be significantly reduced after October.
Friday's data also comes as Prime Minister Fumio Kishida mulls the size and content of his upcoming additional economic measures. Earlier this week, the premier instructed the ruling party to put together a stimulus package focused on easing the impact from inflation and supporting wage growth. Some economists pointed out that the aid may risk further accelerating inflation.
The yen is currently hovering around 149 to the dollar, raising renewed concern that the weak currency may push up import costs and the price of basic goods. Oil prices are also soaring again, posing another risk for the energy resource-poor nation.
A separate concern is the country's lackluster production against the backdrop of the global economic slowdown. Another report said that factory output was unchanged in August from July.
The sluggish production partly reflects weakening demand from trading partners. Japan's exports fell for the second month in a row in August, led by slumps in mineral fuel and chip-making machinery.
Despite higher prices, consumption seems to have held somewhat steady. Retail sales gained 0.1% in August from a month earlier, according to a report from the industry ministry on Friday. Analysts had expected a 0.4% gain. Sales grew 7% from a year earlier. The return of overseas tourists likely continued to support spending at department stores and other shopping facilities.
Meanwhile, the unemployment rate held steady at 2.7%, while the jobs offers-to-applicants ratio in August also remained unchanged from the previous month at 1.29. The latter data is a leading indicator of labor market trends, and means that there were 129 jobs available for every 100 applicants.
Source : Bloomberg
