Japan: after a slight slowdown, inflation accelerates significantly in September, to 2.1%

After slowing slightly in August, inflation in Japan accelerated sharply in September, driven in particular by the rise in food prices against a backdrop of soaring energy prices, according to official statistics published Friday. Consumer prices excluding fresh products increased by 2.1% year-on-year in September compared to 1.7% in August, according to official data published Friday, a figure in line with the expectations of experts surveyed by the Bloomberg agency.

This clear inflationary surge is explained in particular by an increase in the prices of food products (+2.9%, excluding fresh products) which increases the basket of Japanese households. The persistent weakening of the yen against the dollar is making imported products more expensive, the transport cost of which has also exploded in line with oil prices.

Energy prices in Japan, on the other hand, are down (-0.6%) due to subsidies granted by the government. Excluding both food and energy, inflation stood at 2.4%, above market expectations, after 1.9% in August. These inflation figures now rise above the 2% target level set by the Bank of Japan (BoJ). The latter had already raised its rates in mid-September, like other major central banks around the world, in order to counter the strong inflationary tensions caused by the surge in energy prices following the conflict in the Middle East.

The latest figures on consumer prices should convince the BoJ to continue this tightening: analysts generally expect a further increase in rates at its December meeting. From its October meeting, the institution could raise its inflation forecasts.

“With underlying inflation having returned above the 2% target, the arguments in favor of further monetary tightening remain strong,” comments Abhijit Surya, expert at Capital Economics. Even more, “without a 21% fall in the price of rice over one year, inflation excluding fresh food products and energy would have been around 0.2 percentage points higher,” he calculates.

The surge in crude oil prices, with no lull in sight in the clashes in the Middle East, also continues to spread indirectly to all food and consumer prices. The sharp acceleration in inflation in Japan “could be that the indirect effects of the energy shock continue to spread”, alongside a “general rise” in prices in services, while rent inflation “reaches its highest rate in almost 25 years”, adds Abhijit Surya.