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Core inflation, which strips out prices of fresh food, was in line with than the 2.1% forecast by economists polled by Reuters, and accelerated from the 1.7% in the month before.
Headline inflation came in at 2.1%, while the so-called “core-core” inflation, which excludes prices of fresh food and energy and is the Bank of Japan’s preferred gauge, was at 2.4%.
Higher inflation could push the Bank of Japan for another rate hike this year, after a 25 basis points increase in September, as the central bank normalizes its monetary approach after decades of reflationary policy. Japan raised rates to a three-decade high of 1.25% in September.
Finance Minister Satsuki Katayama reportedly told parliament on Wednesday that Japan was “on the cusp of shifting to a period of sustained inflation driven by rising wages,” while acknowledging that higher import costs were also contributing to price growth.
Oil import costs have risen as Japan buys energy from more expensive U.S. sources and switches away from Middle Eastern suppliers oil due to the Iranian conflict. Weakness in yen is also making oil cost more for Japan.
When Katayama was asked by a lawmaker whether the government’s tax cut plan could conflict with the central bank’s efforts to combat inflation with interest rate hikes, he said, “I see no gap between the view of the government and that of the BOJ,” Reuters reported.
On Tuesday, Japan’s Lower House began debating a bill to cut the consumption tax on food to 1% from 8% for two years, public broadcaster NHK reported. It also includes provisions for support payments to workers based on income levels.
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