2.1%: Japan’s National CPI climbs in September

Japan's National Consumer Price Index (CPI) experienced a 2.1% increase year-over-year in September, up from 1.9% in the previous report, according to data released by the Japan Statistics Bureau on Friday. When adjusted for changes in fresh food prices, the CPI rose by 2.1% year-over-year, compared to 1.8% in the prior period (previously reported as 1.7%).

The figures aligned with market expectations. The CPI excluding fresh food and energy rose by 2.4% year-over-year, up from 2.0% in the prior report (previously reported as 1.9%). The Japanese Yen (JPY) saw increased buying activity following the release of the National CPI data, with the USD/JPY pair dropping 1.00% on the day to 156.55.

Inflation measures the increase in the price of a standard set of goods and services. Headline inflation is typically reported as a monthly and yearly percentage change. Core inflation, which excludes more volatile elements like food and fuel, is the metric that central banks aim to control, usually targeting around 2%. When Core CPI exceeds 2%, central banks often raise interest rates, positively impacting the country's currency.

Conversely, lower Core CPI can lead to weaker currencies. Although it may seem counterintuitive, high inflation can strengthen a currency if the central bank raises interest rates, attracting global capital inflows. Central banks generally raise interest rates to tackle higher inflation, while lower inflation often results in weaker currencies.

Gold tends to perform well during periods of high inflation as it maintains its value, but higher interest rates can make it less attractive compared to interest-bearing assets. Conversely, lower inflation usually benefits Gold, as it drives down interest rates, making it a more appealing investment option.