^{Photo: Bloomberg.com}

Inflation Accelerates Again After Four-Month Pause

Japan’s inflation rate edged higher for the first time since May, signaling renewed price pressures just as the country’s new Prime Minister, Sanae Takaichi, steps into office. Government data released Friday showed that core inflation—which excludes volatile fresh food prices but includes energy—rose to 2.9% in September, up from 2.7% in August and matching economists’ forecasts.

The headline inflation rate also climbed to 2.9%, keeping consumer price growth above the Bank of Japan’s 2% target for the 41st consecutive month, a streak that began in April 2022.

Core-Core Inflation Shows Slight Relief

While overall prices continue to rise, there are early signs that underlying inflationary pressures may be easing. The “core-core” inflation rate, which excludes both fresh food and energy costs and is closely tracked by the Bank of Japan (BOJ), slowed to 3% in September from 3.3% in August.

This moderation suggests that price growth in non-energy consumer goods and services may be stabilizing after months of steady increases.

Rice inflation, which made headlines earlier this year, also eased significantly — dropping to 49.2% in September, down from 69.7% in August and well below May’s peak of 101.7%, the highest level in more than five decades.

Market Reaction and Yen Movement

Markets responded cautiously to the inflation data. Japan’s Nikkei 225 index rose 0.78%, while the yen strengthened slightly to 152.53 per U.S. dollar, showing a modest recovery after weeks of pressure.

Analysts say investors are watching closely to see how the BOJ will react, as the central bank faces mounting calls to phase out its ultra-loose monetary policy. With inflation consistently above target, speculation is growing that the BOJ may raise interest rates in the coming months to curb price pressures without derailing the fragile recovery.

A Critical Test for Prime Minister Takaichi

For Prime Minister Sanae Takaichi, who took office amid growing public frustration over the rising cost of living, the latest inflation data is an immediate political and economic challenge.

Experts say managing inflation without choking off growth will define her early months in office. “How to tackle inflation is going to be the first litmus test to judge whether Takaichi can deliver an effective policy package,” said Tomohiko Taniguchi, Special Advisor at the Fujitsu Future Studies Center.

Japan’s aging population, with millions of retirees living on fixed incomes, is particularly vulnerable to price increases. Many households are struggling to keep up with the rising cost of essentials, from food to energy.

Government Plans for Stimulus and Growth

To combat the impact of inflation, reports suggest Takaichi is preparing a stimulus package worth over 13.9 trillion yen ($92.19 billion) aimed at supporting households, boosting investment in growth industries, and strengthening national security. The plan could be unveiled as early as next month.

Economists believe such a package could provide temporary relief but caution that fiscal stimulus alone may not be enough to control inflation if global energy prices rise again or the yen weakens further.

Inflation Still the Top Concern for Households

According to Jesper Koll, Executive Director at Monex Group, if inflation remains above 2% over the next six to nine months, public dissatisfaction could rise sharply. “For Japanese people, the number one, number two, and number three concern right now is inflation,” he said, emphasizing the political risk facing the new government.

As Japan navigates this complex environment, balancing wage growth, consumer confidence, and fiscal stability will be key. With inflation showing signs of persistence, Takaichi’s leadership and the BOJ’s next moves will determine whether Japan can finally achieve stable, sustainable growth — or fall back into economic uncertainty.