(Bloomberg) -- Consumer inflation in Tokyo eased this month after outgoing Prime Minister Fumio Kishida reinstated energy subsidies to help households cope with one of the hottest summers on record.
Consumer prices excluding fresh food rose 2.0% in September, the slowest pace since May, according to the ministry of internal affairs Friday. That matched the median estimate of economists. A gauge that also strips out energy prices stayed at 1.6%.
Slowdowns in electricity and gas prices were the biggest factors behind the deceleration. Tokyo inflation is a leading indicator for national price trends.
The slower price growth isn’t likely to deter the Bank of Japan from conducting a rate hike late this year or early next if conditions allow, as Governor Kazuo Ueda has consistently pledged to raise borrowing costs if the economy performs in line with the bank’s projections.
However, with scant signs of overheating, Friday’s data will support the governor’s view that there is no need to rush with any moves. Ueda said earlier this week that upside inflation risks have receded after the yen posted recent gains. The BOJ is expected to stand pat when it next sets policy on Oct. 31.
Kishida decided to reintroduce subsidies for utilities from August to October after his approval ratings sagged below 30% amid simmering voter frustration over persistent inflation. Average temperatures hit record highs in July, prompting authorities to issue heat warning alerts and urge residents to keep their air conditioners running.
The premier signaled his intention to step down by declaring in August that he wouldn’t run for reelection as head of his ruling Liberal Democratic Party.
The LDP vote takes place later Friday, with parliament expected to select a new premier on Oct. 1. Given the LDP’s dominance, its leader is all but certain to become Japan’s next prime minister.
(Updates with more details.)
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