Core consumer prices rose 2.1% in September, the first reading above the central bank's target in nine months. A narrower measure that strips out energy climbed to 2.4%, a sign the increase is broader than energy.
Japan's core consumer prices, which exclude fresh food, rose 2.1% in September from a year earlier, government data showed on Friday, up from 1.7% in August and in line with economists' forecasts. It was the first time in nine months that the measure exceeded the Bank of Japan's 2% target.
A narrower gauge that also excludes energy rose 2.4%, up from 1.9%. That measure is watched closely by the central bank because it filters out the swings in energy prices, which are elevated now with Brent crude above $113 a barrel.
Why the second number matters
The jump in the narrower index is the more informative part of the report. If inflation were rising only because of oil, the Bank of Japan could treat it as a temporary supply shock. A move from 1.9% to 2.4% in prices outside fresh food and energy suggests that price increases are spreading to goods and services more generally. A weak yen, which raises import costs, adds to that pressure.
The Bank of Japan raised its policy rate to 1.25% last month. It meets on Oct. 29 and 30 and publishes its quarterly outlook report on Oct. 30. People familiar with the central bank's thinking expect it to hold rates at that meeting but say it may raise its inflation forecasts, Reuters reported.
Broadening or noise
One view is that the data keep further rate increases firmly on the table: underlying inflation is broadening, the yen is weak and wage-setters have reason to push for more.
The other is that the print changes little in the near term. It matched forecasts, the central bank is expected to hold next week, and fuel subsidies and oil prices still dominate the headline figure.
Markets
Investors took the data in stride. The dollar was flat at about 156.81 yen early Friday, and the Nikkei 225 closed down 0.34% at 62,693.16.
What to watch
The Bank of Japan's Oct. 30 outlook report, especially any upgrade to its inflation forecasts, and the yen's reaction. Next month's national price data will show whether the broadening continued.