Japan’s annual core consumer inflation ticked up in September but remained at half the pace of the central bank’s hard-to-get 2 percent target, highlighting the challenge of meeting the price goal as the worsening trade disputes blur the economic outlook.

Even though the rate of increase was the fastest in seven months, the gain was mainly because of higher oil costs with most other items rising only slightly, government data showed on Friday.

“We’re not seeing inflation pressure build up. Private spending needs to increase more for core consumer inflation to accelerate beyond 1 percent,” said Takeshi Minami, who is the chief economist at Norinchukin Research Institute. “Inflation will probably stagnate around current levels for some time.”

The nationwide core consumer price index (CPI), which strips the effect of volatile fresh food costs, increase 1.0 percent in September from a year earlier, matching a median market forecast and ticking up from 0.9 percent in August.

The so-called core-core CPI, a more closely monitored measure that the Bank of Japan uses that excludes the effect of both fresh food and energy costs, was at 0.4 percent in September,  in line with the previous month.

The inflation data will be among factors the central bank examines at its rates review to be held on October 30 to 31, when it conducts a quarterly review of its growth and price projections.

BOJ Governor Haruhiko Kuroda on Thursday offered a slightly more upbeat view on prices than three months ago, saying that the core consumer inflation was “moving around 1 percent.”


Increasing energy costs may provide the BOJ some justification to slightly revise up its inflation forecasts, although the boost may be moderated by uncertainty over the fallout from escalating trade disputes, analysts say.

In a quarterly report analyzing Japan’s regional economies, the BOJ slashed its assessment for two regions and warned that companies were becoming more worried about the blow from the turbulent China-US trade war.

Under the present projections made in July, the BOJ expects core consumer inflation to reach 1.1 percent in the year ending in March 2019, and speed up to 1.5 percent in the following year.

Stubbornly soft inflation has dashed the BOJ’s hopes that solid economic growth will translate into higher prices, and could delay the central bank’s exit from ultra-loose policy.

Japan’s economy rebounded in the second quarter from a contraction in the first three months of the current year thanks to the ramped up business spending.

However, escalating trade disputes and string of natural disasters that disrupted supply chains blur the outlook for the export-dependent economy, with some analysts predicting a slight contraction in the July to September quarter. Uncertainty over the economic outlook adds to challenges for the BOJ, which has floundered to fire up wages and prices in spite of the years on heavy money printing.

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