Japan Core Inflation Rises to 2.1%, Back Above BOJ Target

Japan’s core consumer prices rose 2.1% in September from a year earlier, up from 1.7% in August and back above the Bank of Japan’s 2% target for the first time since December, investingLive reported. The core measure, which excludes fresh food but includes energy, came in line with forecasts. Core inflation also quickened to 2.1% from 1.9%.

A narrower gauge that strips out both fresh food and energy accelerated to 2.4% from 1.9%, according to investingLive and ActionForex, with investingLive noting that reading topped forecasts of 2.3%. Investing.com described the core print as the strongest since December 2025.

Goods, services and utilities drive gains

Data compiled by ActionForex showed goods inflation rising to 2.8% from 2.6% and services inflation picking up to 1.5% from 1.2%. Food excluding fresh food climbed 2.9%, household durable goods jumped 6.2%, accommodation rose 4.6% after falling 1.4% the previous month, and water charges increased 4.9%. Rice prices moved the other way, sliding 20.6% from a year earlier, while energy prices fell 0.6%. TokenPost said durable goods and public utility services helped push inflation higher.

investingLive said electricity subsidies were still holding down the core figure, suggesting underlying price pressure is firmer than the headline number shows, and noted that oil prices above US$110 a barrel are feeding import costs. Investing.com reported that government subsidies on consumer fuel had blunted the direct impact of high global oil prices, but that businesses passing on higher costs and a soft yen were expected to keep supporting inflation.

In Tokyo, core inflation reached 2.7% in September and the measure excluding food and energy hit 3.0%, partly because some government support measures in the capital expired, according to investingLive.

BOJ rate hike expectations build

The Bank of Japan raised its policy rate to 1.25% in September in a 7-2 vote, a level TokenPost described as a three-decade high. Governor Kazuo Ueda told parliament this week that underlying inflation is “very close to the 2% goal,” investingLive reported.

Capital Economics said in a note cited by Investing.com that with underlying inflation back above target, “the case for further tightening remains on solid ground.”

Economy Minister Minoru Kiuchi said conditions have not yet been met for an official declaration that deflation is over, adding that any such decision would take into account the CPI, the GDP deflator and the factors behind underlying inflation, according to investingLive.

The yen firmed after the release. VT Markets reported the US dollar down 1.00% against the yen on the day at 156.55.

What’s next for Core Inflation

The BOJ’s next policy meeting runs from October 29 to 30. investingLive said the central bank is expected to keep rates at 1.25% but may signal that underlying inflation has roughly reached 2%, adding that Reuters, citing sources, reported the bank may raise its inflation forecasts because of persistently high oil prices. ActionForex said the data do not necessarily point to a hike at the October meeting, with December remaining a possibility for the next move.

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