---
title: "Japan's CPI accelerates, and the timing of interest rate hikes remains controversial"
type: "News"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/news/262541483.md"
description: "Japan's core CPI in September rose 2.9% year-on-year, exceeding the central bank's 2% target for three consecutive years, mainly driven by energy and food prices. Despite high inflation, economic growth momentum is weakening, with PMI data showing a contraction in manufacturing and a slowdown in services. There are still internal disagreements within the central bank regarding the timing of interest rate hikes, and most analysts expect no change next week, with the next rate hike possibly delayed until January next year"
datetime: "2025-10-24T04:17:00.000Z"
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  - [zh-CN](https://longbridge.com/zh-CN/news/262541483.md)
  - [en](https://longbridge.com/en/news/262541483.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/262541483.md)
---

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# Japan's CPI accelerates, and the timing of interest rate hikes remains controversial

Japan's inflation data for September exceeded expectations, with the core Consumer Price Index (CPI) rising 2.9% year-on-year, remaining above the Bank of Japan's 2% target for more than three consecutive years, adding pressure for interest rate hikes ahead of next week's policy meeting. Despite persistent high inflation, there are still differences within the central bank regarding the timing of interest rate hikes, **most analysts expect the Bank of Japan to keep interest rates unchanged at this meeting.**

Data released by Japan's Ministry of Internal Affairs and Communications on Friday (October 24) showed that excluding the volatile prices of fresh food, **Japan's core CPI in September rose 2.9% year-on-year, up from 2.7% in August, in line with expectations.** This data will be one of the key considerations for the Bank of Japan's two-day policy meeting next week, where the central bank will discuss whether to maintain the current interest rate level of 0.5% and release the latest quarterly growth and price forecasts.

Concerns about inflation risks are rising within the Bank of Japan. At the September policy meeting, two of the nine committee members proposed raising the interest rate from the current 0.5% to 0.75%, but this was rejected by a majority vote. **This marks the first clear hawkish voice within the central bank.**

New Prime Minister Kishi Sanae emphasized that the government should bear ultimate responsibility for economic policy and stressed the importance of close coordination with the central bank. Analysts believe that **central bank policymakers may want more time to consult with the new government and observe more signs of economic strength before taking action.**

## Inflation Acceleration Driven by Energy and Food

Data shows that the acceleration of inflation in September was mainly driven by rising energy costs and continued increases in food prices.

Food prices, excluding fresh food, rose 7.6% year-on-year. The core indicator, which excludes fresh food and fuel costs and is viewed by the Bank of Japan as better reflecting underlying price trends, rose 3.0% year-on-year in September, slowing from 3.3% in August.

Service prices rose 1.4% year-on-year in September, far below the 4.2% increase in goods prices, indicating that businesses are only gradually passing on higher labor costs.

Abhijit Surya, a senior economist at Capital Economics, stated:

> "Currently, both the inflation rate excluding fresh food and the inflation rate excluding fresh food and energy are likely to meet or exceed the Bank of Japan's forecast for this fiscal year."

## Concerns Arise Over Weakening Economic Growth Momentum

Despite ongoing inflation, economic data indicates that growth momentum is weakening. The latest Japan Purchasing Managers' Index (PMI) from S&P Global Market Intelligence shows that the growth momentum in the private sector further diminished in October.

Annabel Fiddes, Deputy Director of Economics at S&P Global Market Intelligence, pointed out that **data indicates that Japan's manufacturing sector remains in contraction**, and although the service sector remains a key growth engine for the economy, the weakening momentum in this area is worth monitoring in the coming months.

Central bank policymakers may want more time to consult with the new government and observe more signs of economic strength. Abhijit Surya noted in the report:

> The central bank's statements in recent weeks have remained cautious, with committee members concerned about the impact of U.S. tariffs on the economy and the spillover effects on corporate profits and wage growth

## The Path of Interest Rate Hikes Remains Uncertain

The Bank of Japan exited its aggressive stimulus program last year, and in January this year, raised the short-term interest rate to 0.5%, believing that Japan is approaching a stage where it can sustainably achieve the 2% inflation target.

Although consumer inflation has exceeded the 2% target for more than three consecutive years, Governor Kazuo Ueda emphasized that **given the uncertainty of the impact of U.S. tariffs on the Japanese economy, caution is needed in further interest rate hikes.**

Ueda also stated that Japan needs to see sustainable inflation driven by strong domestic demand and wage growth before the central bank resumes its rate hike cycle.

Capital Economics believes there are still ample reasons to resume monetary tightening.

> "However, as policymakers still wish to gather more information about the health of the economy, we expect the next rate hike to occur in January."

Despite most economists and investors expecting the central bank to maintain interest rates next week, the continued inflation above the target and the increasing internal divisions within the central bank have led to rising expectations for interest rate hikes

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