Japan’s Core Inflation Rises to 2.9%, Core-Core Eases to 3% Amid Stimulus Plans

• Core-core inflation slowed to 3% in September from 3.3% in August, indicating potential easing in underlying price trends.

• Rice prices, a key household staple, increased 49.2% year-over-year in September, down sharply from 69.7% in August amid ongoing supply challenges.

• Prime Minister Sanae Takaichi faces economic headwinds, with plans for a 13.9 trillion yen stimulus package to support households and investments.

Japan’s core inflation hits 2.9% in September, signaling persistent pressures. Explore BOJ’s response, market reactions, and stimulus plans to navigate economic shifts—stay informed on global impacts today.

What is Japan’s Core Inflation Rate in September?

Japan’s core inflation rate climbed to 2.9% in September, aligning with analyst forecasts and marking an uptick from the 2.7% recorded in August, according to government data. This measure, which excludes volatile fresh food prices but incorporates energy costs, reflects broader household spending trends and exceeds the Bank of Japan’s 2% target for the 41st consecutive month. Headline inflation mirrored this at 2.9%, underscoring ongoing inflationary dynamics in the economy.

How Has Core-Core Inflation Evolved Recently?

The core-core inflation index, favored by the Bank of Japan for gauging entrenched price pressures, decelerated to 3% in September from 3.3% in August. This gauge strips out both fresh food and energy, offering insight into more stable underlying trends. Despite the slowdown, it remains elevated, suggesting that while some cooling is evident, broader inflationary forces persist amid global supply disruptions and import costs. Experts note this mixed signal complicates the central bank’s path toward policy normalization after years of ultra-low interest rates.

Frequently Asked Questions

What Impact Is Inflation Having on Japanese Households?

Inflation is straining Japanese households, particularly those on fixed incomes like retirees drawing pensions. Rice prices, up 49.2% year-over-year in September despite a slowdown from prior peaks, continue to burden daily budgets. Tomohiko Taniguchi, Special Advisor at the Fujitsu Future Studies Center, highlighted on CNBC’s Squawk Box Asia that this pain is acute for millions, testing Prime Minister Sanae Takaichi’s early policy responses.

Will the Bank of Japan Raise Interest Rates Soon?

The Bank of Japan is cautiously monitoring inflation data, with the 2.9% core rate keeping pressure on for potential normalization. Traders anticipate action amid the yen’s slight strengthening to 152.53 per dollar following the report. However, the cooling core-core figure may delay hikes, as the central bank balances growth risks from expensive imports and fading consumer confidence.

Key Takeaways

• Mixed Inflation Signals: Core inflation at 2.9% shows persistence, but core-core slowing to 3% hints at easing pressures in Japan’s economy.
• Household Struggles Persist: Rice inflation dropped to 49.2% year-over-year, yet remains a significant cost driver for families reliant on staples.
• Policy Actions Ahead: Prime Minister Takaichi’s proposed 13.9 trillion yen stimulus targets inflation relief, tech investments, and defense—monitor for unveiling next month.

Rice Prices Fall but Households Still Struggle

Rice inflation, which reached extreme levels earlier in the year, continued its downward trajectory but stayed burdensome. September’s 49.2% year-over-year increase, while a decline from August’s 69.7% and May’s record 101.7%—the highest in over 50 years—offers limited solace to households. For many Japanese families, rice is a dietary cornerstone, and even moderated rises exacerbate financial strain amid broader cost-of-living challenges. This trend underscores the uneven relief from inflation moderation, with essential goods still driving up expenses.

Financial markets responded swiftly to the data. The Nikkei 225 index closed 0.78% higher, reflecting optimism tied to the inflation print. The yen appreciated modestly to 152.53 against the dollar, though volatility persists as investors weigh the Bank of Japan’s next moves. Discussions around ending decades of accommodative policy have intensified, but action remains elusive despite repeated signals.

Tomohiko Taniguchi emphasized the human cost during his October 13 appearance on CNBC’s Squawk Box Asia. With Japan’s aging population heavily reliant on pensions, inflation erodes purchasing power significantly. He described it as a critical test for the new leadership: “How to tackle inflation is going to be the first litmus test to judge whether Takaichi could deliver a policy package.”

Takaichi Plans ¥13.9T Stimulus while BOJ Stays on Edge

Prime Minister Sanae Takaichi, who assumed office this week, is confronting a complex economic landscape marked by high import costs, supply chain disruptions, and waning consumer sentiment. In response, reports from Reuters on October 22 indicate she is preparing a substantial stimulus package exceeding 13.9 trillion yen, equivalent to approximately $92.19 billion. This initiative aims to alleviate household burdens from rising prices, bolster investments in emerging technologies, and enhance defense capabilities, with a potential rollout as early as next month.

Analysts express mixed views on its effectiveness. Jesper Koll, director at Monex Group, warned that sustained inflation above 2% could undermine public support for the administration. “If inflation in Japan is still not below 2% in six to nine months’ time, the popularity of this cabinet is going to plummet,” he stated. For the average Japanese citizen, inflation ranks as the top economic concern, amplifying the urgency for tangible relief measures.

Beyond Japan, positive momentum rippled through Asian markets. South Korea’s Kospi surged 2%, achieving a new record high on Friday, buoyed by regional developments. The Kosdaq index, focusing on smaller firms, advanced 0.92%. South Korea’s finance ministry signaled readiness to intervene in currency markets if volatility in the won escalates, following recent fluctuations. The won gained 0.11% to 1,434.7 per dollar, though it has depreciated over 4% in the past three months while holding a 2.86% year-to-date increase.

Other regional indices mirrored the upbeat tone. Hong Kong’s Hang Seng rose 0.83%, and China’s CSI 300 climbed 0.57%. Australia’s ASX/S&P 200 opened 0.19% higher. In Australia, Reserve Bank Governor Michele Bullock announced plans to overhaul the central bank’s interbank settlement system, the Reserve Bank Information and Transfer System, beginning next year. Enhancements will include technological upgrades, extended operating hours, and greater utilization of central bank reserves in transactions, aiming to modernize financial infrastructure.

These developments occur against a backdrop of global uncertainties, including upcoming international engagements. White House Press Secretary Karoline Leavitt confirmed U.S. President Donald Trump’s itinerary, departing for Malaysia on Friday night en route to Japan and South Korea. He is set to meet China’s President Xi Jinping the following Thursday after addressing the APEC CEO Summit, as noted in Reuters coverage. Such diplomatic moves could influence regional economic sentiments and trade dynamics.

Conclusion

Japan’s core inflation rate of 2.9% in September, coupled with the cooling core-core measure at 3%, paints a nuanced picture of persistent yet moderating price pressures in the economy. As Prime Minister Sanae Takaichi navigates these challenges with a proposed 13.9 trillion yen stimulus and the Bank of Japan contemplates rate adjustments, households continue to grapple with elevated costs like rice inflation. Looking ahead, effective policy implementation will be key to restoring confidence—investors and citizens alike should watch for upcoming announcements that could shape Asia’s economic trajectory.