Tokyo  -  Japanese inflation slowed slightly in October with prices up 2.3 percent on-year, official data showed, as the government readies a huge economic stimulus package. The core Consumer Price Index (CPI), which excludes volatile fresh food prices, was down from 2.4 percent in September and 2.8 percent in August. But it stayed above the Bank of Japan’s key inflation target of two percent, set over a decade ago as part of efforts to boost the stagnant economy.

Japan’s minority government is expected to unveil a 22 trillion yen ($140 billion) stimulus package on Friday, aiming to put more money in consumers’ pockets after the ruling party’s worst election result in 15 years. The stimulus includes energy and fuel subsidies as well as cash handouts for low-income households in the world’s fourth-biggest economy, local media has reported. “The pace of price increases is expected to accelerate toward the end of (the current fiscal year) as inflation mitigation measures are scaled back,” Taro Saito from NLI said.

Going forward, “the upward pressure on service prices from wage increases will likely be offset by a slowdown in goods price growth driven by yen appreciation, causing the inflation rate to fall below the Bank of Japan’s two percent target”, he added. The bank’s target has been surpassed every month since April 2022, although policymakers have questioned to what extent that is down to temporary factors such as the Ukraine war. The central bank raised interest rates in March for the first time since 2007 and again in July, in initial steps towards normalising its ultra-loose monetary policies. Its next policy decision is on December 19.