Japan inflation ticks up in September but way off BOJ target

[TOKYO] Japan's consumer prices rose for the ninth straight month in September, official data showed Friday, but inflation remained well below the central bank's target in the world's third largest economy.

Prices rose 0.7 per cent from a year earlier after stripping out volatile prices for fresh food, the internal affairs ministry said, buoyed by a rise in energy costs such as fuel, light and water charges.

But excluding fresh food and energy, prices edged up just 0.2 per cent in September compared to the same month the previous year.

The figures are far off the Bank of Japan's 2 per cent inflation target - seen as crucial in a long battle against deflation that is blamed for holding back the once-booming economy.

"We expect inflation to settle around 0.5 per cent in coming months, leaving little scope for tighter monetary policy," Marcel Thieliant, senior Japan economist at Capital Economics, said in a note to client.

"Energy inflation should soon start to slow again" due to lag between prices of electricity and gas and prices of crude oil, he said.

Japan's weak inflation stands in sharp contrast to other major economies whose central bankers are looking to wind up their easing policies.

The European Central Bank on Thursday began weaning the eurozone economy off the high dose of monetary support, saying it would halve its purchases of government and corporate bonds to 30 billion euros (S$47.9 billion) a month.

The US Federal Reserve is meanwhile widely expected to adopt its third interest rate increase of the year in December and US policymakers have forecast another three rate hikes in 2018.

Japan's prospects have recently improved, however, with investments linked to the Tokyo 2020 Olympics providing a welcome boost.

Japan's economy expanded by 0.6 per cent in the April-June period, notching up its sixth straight quarter of growth, the longest economic expansion in more than a decade.

However, wage hikes have been tepid and efforts to lift inflation have fallen flat despite years of aggressive monetary easing by Japan's central bank.

AFP