Japan’s core inflation hit 2.1 percent in September, rising above the central bank’s target. Official data showed this jump from 1.7 percent in August, driven by high food and energy costs. Abhijit Surya said, "The case for further tightening remains on solid ground." This trend suggests more interest rate hikes.
Inflation in Japan accelerated sharply in September, official data showed Friday, rising above the Bank of Japan's target level.
The acceleration was driven in particular by rising food prices against a backdrop of soaring energy costs due to conflict in the Middle East.
Excluding volatile fresh produce, inflation was 2.1 percent, up from 1.7 percent in August, according to the internal affairs ministry reading.
The figure was in line with market expectations and above the 2.0 percent target set by the central bank, further raising expectations of an interest rate hike.
"With underlying inflation back above the Bank of Japan's 2 percent target, the case for further tightening remains on solid ground," said Abhijit Surya of Capital Economics.
"News reports suggest that the Bank may revise up its inflation forecasts at its October meeting. That should set the stage for another hike in December."
Meanwhile, the weak yen is also driving up the cost of imported goods.
But government support for gasoline and electricity fees mitigated the impact on energy prices, according to the internal affairs ministry.