Japan’s core inflation rate slowed for a second consecutive month in October, influenced by energy subsidies, according to government data released Friday.

The nationwide core consumer price index (CPI), which excludes volatile fresh food prices, rose 2.3% year-on-year in October amid government subsidies to curb energy price increases.

This increase in the core CPI was lower than September’s 2.4% and August’s 2.8%. Japan’s inflation rate has remained at or above the Bank of Japan’s 2% target level since April 2022.

According to data from the Ministry of Internal Affairs and Communications, the core-core CPI (excluding energy and fresh food prices), which reflects underlying inflation trends, rose 2.3% year-on-year, accelerating from the previous month’s 2.1%.

Koichi Fujishiro, senior economist at Dai-ichi Life Research Institute, noted that excluding the effects of government subsidies, the data indicates persistent underlying inflation. He believes the latest figures will encourage the Bank of Japan to raise interest rates at an appropriate time.

Bank of Japan Governor Kazuo Ueda previously indicated that policy rates would be increased from the current level of around 0.25% if price and economic growth align with the central bank’s expectations.

According to ministry data, energy prices rose 2.3%, significantly lower than September’s 6.0% increase.

Among other major items, food prices increased 3.8%, higher than the previous month’s 3.1%, primarily due to historic rice price increases.

Rice prices surged 58.9%, the largest increase since comparable data became available in 1971. This surge resulted from reduced harvests during last year’s unusually hot summer and farmers passing increased costs of new rice to consumers.

Overall consumer price increases were also affected by many companies raising prices in October (the start of the second half of Japan’s fiscal year).

Specifically, chocolate prices rose 19.3%, while earthquake and fire insurance prices increased 7.0%.

Service prices (a key indicator closely monitored by the Bank of Japan in monetary policy decisions as it often reflects wage increases) rose 1.5%, up from September’s 1.3%.

Key Data Points:

• October core CPI rose 2.3% year-on-year.
• Core-core CPI increased 2.3% year-on-year.
• Energy price increases narrowed to 2.3%.
• Food prices rose 3.8%.
• Rice prices recorded a historic 58.9% increase.
• Service prices increased 1.5%.

These figures reflect Japan’s current inflation situation and the impact of government subsidy policies on price trends. They also indicate that while overall inflation has moderated, price pressures persist in certain sectors.