Rising Inflation Jumped to 40-Year High in October

Core consumer prices in Tokyo—an indicator of what to expect nationwide—leaped 3.4% in October, its fastest pace in over 40 years.
This key index of consumer inflation for Tokyo, excluding volatile fresh food, rose for the 14th straight month, with the speed of its increase picking up from 2.8% in September. It has stayed above the Bank of Japan’s 2% target for the past five months.
Food prices in Tokyo jumped 5.9% and energy prices also surged 24.2%, with electricity and city gas bills up over 26.9% and 29.3%, respectively, in a blow to consumers when wage growth remains stagnant in Japan.

Labour Force Survey Monthly Results¹

(1) Employment

The number of employed persons in September 2022 was 67.66 million, an increase of 400,000 over the same month the previous year. By gender, this included 37.11 million men, up 40,000 from the previous year, and 30.31 million women, up 80,000.

(2) Unemployment

The number of unemployed persons in September 2022 was 1.87 million, a decrease of 70,000 from the same month in the previous year, for the thirteenth straight monthly decline. The seasonally adjusted unemployment rate in September was 2.6%, up 0.1% over the previous month. The unemployment rate for men was 2.8%, up 0.1% over the previous month and 2.4% for women, up 0.1% over the previous month.

(3) Job Availability

Japan’s job availability in September stood at 1.34, up 0.02 over the previous month, showing an improvement for the nineth straight month, aided by a recovery in the services sector as the economic hit from the COVID-19 pandemic receded. The number of job offers climbed 0.9% from the previous month, notably increasing in the accommodation and food service sectors. The number of job seekers declined 0.8%.The ratio of regular employee job offers to applicants was 1.03, up 0.01 over the previous month. The ratio of new job offers to applicants, a leading indicator for the labour market, was 2.27, down 0.05 from the previous month.

Industrial Production ²

Japan’s industrial output in September decreased 1.6% from the previous month, after the third consecutive month of increase. By sector, motor vehicles saw the biggest plunge of 12.4% from the previous month. Inorganic and organic chemicals saw a decrease of 6.3% and production machinery a 1.8% fall.
While production and shipments both decreased, inventories and inventory ratio increased.
The industries that mainly contributed to the decrease were as follows: (1) motor vehicles; (2) petroleum and coal products; and (3) transport equipment (excl. motor vehicles), in that order.
According to the Survey of Production Forecasts in Manufacturing, production was expected to decrease by 0.4% in September and increased by 0.8% in November.

Family Income and Expenditure Survey ³

(1) Expenditure of Households of Two Persons or More

Average monthly consumption expenditure of households of two or more persons in September was 280,999 yen, up 5.9% in nominal terms and up 2.3% in real terms from the previous year, increasing for the fourth straight month, aided by the lifting of COVID-19 restrictions that prompted a rise in recreational and dining expenditure. By component, spending on culture and recreation rose 15.1% in real terms from a year earlier.

(2) Income and Expenditures for Workers’ Households

Average monthly income per household stood at 499,438 yen, up 3.7% in nominal terms but down 0.2% in real terms from the previous year. The average level of consumption expenditure was 313,989 yen per month, up 6.2% in nominal terms and up 2.6% in real terms year-on-year.

Consumer Prices ⁴

The consumer price index (CPI) in September was 103.1 (2020 = 100), up 3.0% over the previous year and up 0.3% over the previous month, driven by higher commodity prices and a weak yen. Core inflation (CPI less food and energy) was up 1.8% over the previous year, marking the sixth straight month of increase. Energy prices surged 16.9%, with gasoline, kerosene, city gas, and electricity bills all marking double-digit gains. Food prices, excluding fresh food items, rose 4.6%, the largest increase since March 2015.
The BOJ has taken the view that the recent bout of inflation should only be temporary because it is mainly due to higher energy and raw materials costs, contrary to the global trend of monetary tightening.

1. Source: Labour Force Survey Monthly Results (Statistics Bureau of Japan)
   (https://www.stat.go.jp/english/data/roudou/results/month/index.html)
2. Source: Indices of Industrial Production (Ministry of Economy, Trade and Industry)
   (https://www.meti.go.jp/english/statistics/tyo/iip/index.html)
3. Source: Summary of the Latest Month on Family Income and Expenditure Survey (Statistics Bureau of Japan)
   (https://www.stat.go.jp/english/data/kakei/156.html)
4. Source: Consumer Price Index (Statistics Bureau of Japan)
   (https://www.stat.go.jp/english/data/cpi/1581-z.html)