Tokyo's Consumer Inflation Slows as Subsidies Kick in — Update

By Megumi Fujikawa

Consumer inflation grew at a slower pace in Tokyo in September due to the effects of energy subsidies, likely giving the Bank of Japan more time to examine economic conditions more thoroughly before its next action.

The overall consumer-price index in the Tokyo metropolitan area rose 2.2% in September from a year earlier, compared with a 2.6% increase in August, government data showed Friday.

Energy prices rose 9.5% in September, compared with a 17.4% jump in August. The government reintroduced subsidies for electricity and gas bills for August to October.

The data comes as speculation is growing over the timing of the Bank of Japan's next rate increase. Tokyo figures are considered a leading indicator of nationwide CPI.

The Japanese central bank has pledged to raise interest rates further if the economy and prices grow in line with its projections. However, Gov. Kazuo Ueda has recently become more cautious about the outlook, saying that uncertainties are rising over the U.S. and other overseas economies.

"The results are likely to be a headwind for the BOJ's additional rate increases," said Takayuki Miyajima, an economist at Sony Financial Group.

In addition to the slowdown in energy inflation, Miyajima cited service prices and so-called core-core CPI, which strips out fresh food and energy prices, as worrying signs.

Trends in service inflation are likely to hold the key to policy decisions because they are seen as a gauge of the strength of wage growth and consumption.

"Service prices are an important factor in determining underlying inflation," BOJ Gov. Kazuo Ueda had said at a press conference Tuesday.

The bank will pay extra attention to October data because Japanese companies revise their selling prices during that month, Ueda added.

Service prices in Tokyo rose 0.6% from a year earlier in September, slightly slower than the 0.7 rise in August.

Core-core consumer prices rose 1.6% in September from a year ago, matching the pace marked in August. That suggests that underlying inflation may not be rising too quickly above the BOJ's 2% target.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

September 26, 2024 22:03 ET (02:03 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.