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Japan’s consumer inflation rises for second month in October -Breaking

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© Reuters. FILEPHOTO: Shoppers in protective masks are seen at a souvenir shop on Kokusai-dori. This is during the covirid-19 pandemic.

By Daniel Leussink

TOKYO (Reuters – Japan’s core consumer prices increased for the second month straight in October. These are further signs that increasing energy and raw material costs are steadily pushing up inflation.

Inflation in consumer prices is likely to rise in the coming months because of higher fuel costs. However, any price increases in this country will be modest compared to other advanced economies since weak wage growth prevents firms from increasing them too much.

According to government data, the core consumer price index (CPI), which includes volatile food prices, but does not include fuel costs, increased 0.1% in October according to government data.

It was similar to the median forecast of Reuters, and it followed a similar uptick in September. This was the first increase since March 2011.

These data are among the factors that the Bank of Japan will examine at the end of next month’s policy meeting.

Japan was exposed to rising global commodity prices. This led to the largest rise in wholesale inflation since October 2004. Core CPI is still close to zero because of weak consumer, which keeps prices from rising.

BOJ Governor Haruhikokuroda indicated this week that inflation will accelerate to around 1.1% in the first quarter of next year as the economy returns back to pre-coronavirus levels. However, it is far from its target of 2%.

In its pursuit to achieve that goal, the central bank continues to use massive monetary stimuli. This is despite concerns about potential side effects of low interest rates on banks’ bottom line.

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