Investing.com-- Consumer price index inflation in Tokyo eased slightly less than expected in October, although core inflation was still seen dropping below the Bank of Japan’s annual target as private spending cooled.
Core CPI inflation- which excludes volatile fresh food prices- grew 1.8% year-on-year in October, government data showed on Friday. The reading was slightly above expectations of 1.7% and fell from the 2% seen in the prior month.
A core reading that excludes both fresh food and energy prices rose to 1.8% in October from 1.6% in the prior month. The reading is a key gauge of underlying inflation and is closely watched by the BOJ, and remained below the central bank’s 2% annual target.
Headline CPI inflation fell to 1.8% in October from 2.2% in the prior month.
Tokyo inflation usually acts as a bellwether for national Japanese inflation, with Friday’s reading indicating that private spending and price momentum may be slowing after a strong pick-up earlier this year.
Recent purchasing managers index data showed Japanese business activity weakened in October, especially as local demand waned. National inflation data released last week also showed some cooling in CPI inflation through September.
Friday’s reading comes just a week before a BOJ meeting, where the central bank is widely expected to keep interest rates unchanged. Before that, a Japanese general election is set to take place this Sunday, with the ruling Liberal Democratic Party facing the possibility of needing a coalition to retain power.
Doubts over slowing inflation and changes in Japan’s government have spurred increased bets that the BOJ will not be able to hike interest rates as aggressively as assumed before.