Thursday, January 15, 2026, an employee at the Celsior Wadamachi supermarket in Yokohama. Rising food prices are a key factor driving a broader rise in inflation, with Friday’s data expected to show consumer price growth has exceeded the central bank’s 2% target for the fourth straight calendar year.
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Japan’s core inflation rate hit 2.1% in September, the highest this year, beating analysts’ expectations, weighed down by higher import costs due to a weaker yen and the indirect impact of rising energy costs.
Core inflation, which excludes fresh food prices, accelerated from 1.7% in the previous month, in line with economists’ expectations in a Reuters poll.
Headline inflation was 2.1%, while so-called “core-core” inflation, which excludes fresh food and energy prices, was 2.4%. This is an indicator recommended by the Bank of Japan.
“This acceleration is noteworthy, especially as it comes despite a sharp deceleration in fresh food inflation and continued energy deflation,” said Abhijit Surya, Asia Pacific senior economist at Capital Economics.
Although US prices have seen a notable 20.6% drop year-on-year, Surya said the sharp drop could not prevent overall commodity inflation from rising to 2.8% from 2.6% in August.
“One reason could be the continued indirect effects of the energy shock, with ‘other manufactured goods’ inflation rising to 3.9%, a 13-month high,” Surya added.
Consumer energy prices, which fell 0.6% in September, have mostly fallen so far this year thanks to subsidies handed out by the Takaichi administration despite the Iran war.
Japanese benchmark Nikkei Stock Average It fell 1.62% on Friday. circle Against the dollar, it rose to 156.15.
Rising inflation could prompt the central bank to raise interest rates again this year, following a 25 basis point hike in September, as the bank normalizes its monetary approach after decades of reflation. Japan raised its policy interest rate to 1.25% in September, the highest level in 30 years.
Surya said that with underlying inflation once again above the Bank of Japan’s 2% target, the rationale for further tightening remained strong, and he expected another rate hike in December.
According to government data, inflation appears to be driven by increases in the prices of durable goods and utility bills. Services inflation also rose slightly from 1.2% to 1.5%.
Finance Minister Satsuki Katayama reportedly told parliament on Wednesday that Japan was “moving into a period of sustained inflation driven by rising wages,” acknowledging that rising import costs were also contributing to the rise in prices.
Oil import costs are rising as Japan buys energy from more expensive U.S. sources and switches away from oil sources in the Middle East due to the Iran conflict. The weaker yen is also pushing up oil prices in Japan.
“I don’t see any gap between the government’s view and the Bank of Japan’s view,” Katayama said when asked by a lawmaker whether the government’s tax cut plan could conflict with the central bank’s efforts to combat inflation by raising interest rates, according to Reuters.
On Tuesday, Japan’s House of Representatives began deliberating a bill that would lower the consumption tax on groceries from 8% to 1% for two years, public broadcaster NHK reported. It also includes provisions for support payments to workers based on their income level.
