Japan: Inflation drops to five-month low in September
Latest reading: Inflation fell to 2.5% in September from August’s 3.0%. September’s result marked the weakest inflation rate since April.
Accordingly, the trend pointed down mildly, with annual average inflation coming in at 2.7% in September (August: 2.8%). Meanwhile, core inflation—the Bank of Japan (BOJ)’s main inflation gauge—fell to 2.4% in September from August’s 2.8%, the first slowdown in five months and slightly undershooting market expectations.
Finally, consumer prices dropped 0.26% from the previous month in September, contrasting the 0.52% rise logged in August. September’s result marked the weakest reading since February 2023.
Outlook: The slowdown in core inflation was largely due to government subsidies for utilities, which are due to expire at the end of October. A measure of deeper price pressures—which excludes energy as well as fresh food prices—rose to 2.1% from 2.0%, powered by recent strong pay gains and a weaker yen. As a result, September’s print is unlikely to significantly affect the BOJ’s hiking cycle, with most market analysts expecting a pause at its next meeting on 31 October and renewed rate increases in December or January.