Eamonn Sheridan says Japan's September underlying inflation accelerated. Despite
fuel government subsidies, goods and services price gains widened. Core CPI
ex‑fresh food but including fuel rose 2.1% YoY (in line); core CPI ex‑fresh food
and fuel — the BOJ's preferred gauge — climbed from 1.9% to 2.4% YoY. Goods
inflation rose to 2.8% from 2.6% and services inflation to 1.5% from 1.2%,
signaling firms are passing higher wages to customers. Rising fuel costs tied
to the prolonged Middle East conflict, yen weakness lifting import prices, and
robust AI‑related demand have bluntly undermined the subsidy effect. The print
reinforces market bets on a BOJ hike in December and shifts attention to how
high policy rates could go; BOJ wording in next week's Outlook Report may shape
expectations for rates after December as it balances broader inflation against
signs of cooling labor market and domestic demand.
