Core Inflation Rises in Japan, Paving the Way for BOJ Interest Rate Hike

Forex - Japan's overall consumer inflation continued to slow in October, but an increase in core price pressures may further pave the way for the central bank to raise interest rates in December. Japan's headline inflation rate fell to 2.3% in October, the lowest level since January, dropping below the 2.5% seen in September. The core inflation rate, excluding fresh food prices, also declined from 2.4% in September to 2.3% in October. Economists had expected the core inflation, excluding fresh food, to be at 2.2%. Energy prices rose by 2.3% in October, significantly slowing compared to the previous month's 6.0% increase due to the impact of government energy subsidies. The inflation reading known as "core" inflation, which excludes both fresh food and energy prices, increased from 2.1% in September to 2.3% in October. The Bank of Japan has long stated that its target is a "virtuous cycle between wages and prices." Therefore, a weak inflation figure may suggest that the bank should continue its accommodative monetary policy stance. Marcel Thieliant, Head of Asia-Pacific at Capital Economics, stated, "The recent recovery in consumer spending and the renewed weakening of the yen, along with the strengthening of core inflation, bolster the case for another BOJ rate hike next month."