— Candidates for Ruling Party Leader, Thus Prime Minister, to Debate Campaign Platforms
By Max Sato
(MaceNews) – Here are the key Japanese political and economic events for the coming week.
Ahead of the Oct. 4 election of the leader of the ruling conservative Liberal Democratic Party, and thus the prime minister, candidates will be delivering speeches and making media appearances to discuss their campaign promises.
Whoever is elected will inherit unprecedented challenges on the trade and diplomatic fronts that have been generated by U.S. President Donald Trump. Prime Minister Shigeru Ishiba and his trade negotiating team have won some compromise from top U.S. officials but the uncertainty lingers, given Trump’s erratic policymaking.
Earlier this month, Ishiba announced his decision to step down, taking the blame for crushing defeats for his ruling Liberal Democratic Party in general elections, first in the upper house last year and in the lower house in July.
On the domestic economic front, there are only a few indicators due for release and financial markets are expected to remain supported by hopes that whoever replaces Ishiba will provide a fresh approach to reinvigorate consumer spending amid sticky goods inflation and lagging services price (wage) hikes.
Consumer inflation in Tokyo, the leading indicator of the national average, is expected to have stabilized under 3% in September, with the core CPI (excluding fresh food) seen up to 2.6% on year after having eased to 2.5% in August from 2.9% in July in light of easing upward pressures on processed food prices as well as national and provincial fiscal support.
At its Sept. 18-19 meeting, the Bank of Japan’s nine-member board, as widely expected, decided in a 7 to 2 vote (two from the financial industry) to maintain the target for the overnight interest rate at 0.5% for the fifth straight meeting after hiking it by 25 basis points (0.25 percentage point) in January.
Board members Hajime Takata and Naoki Tamura both called for raising the target for the overnight interest rate by 25 basis points (0.25 percentage point) to 0.75%.
Hajime Takata, formerly with Mizuho Securities, argued that the bank’s 2% price stability target had been largely met. Naoki Tamura, formerly with SMBC, urged central bank to tick policy rate up closer to what is considered to be neutral to economic activity amid rising inflation risk.
The board also decided in a unanimous vote to start a gradual process of selling off its massive holdings of exchange-traded funds (ETFs) and Japanese real estate investment trusts (J-REITs) “as soon as it is ready” as part of unwinding of excess monetary easing.
The BOJ will try to “avoid incurring losses and disturbing the markets as much as possible,” reflecting the way it adopted for selling off shares (finished in July) at a an annual pace of roughly Y150 billion, or Y620 billion at market value, and limiting each transaction sum to 0.05% of total trading values.
As for the ETFs, the annual selling amount would be about Y330 billion, or Y620 billion at market value, and that for the J-REITs are estimated to be some Y5.5 billion, or Y5.5 billion at market value.
Governor Kazuo Ueda told a post-meeting news conference on Sept. 19 that it would likely to take “more than 100 years” to complete the process.
– Monday, Sept. 22
1000 JST (0100 GMT Monday/2100 EDT Sunday, Sept. 21) The LDP officially announces the details of its leader election.
– Monday, Sept. 22
1300 JST (0400 GMT/0000 EDT) Candidates to replace Ishiba represents their campaign platforms at the LDP headquarters.
– Monday, Sept. 22
1400 JST (0500 GMT/0100 EDT) The Bank of Japan releases the details of real trade indexes. The initial data has shown that real export index edged up 0.3% on the month in August after slumping 4.3% in July and rising 3.3 % in June.
Wednesday, Sept. 24
TBA – Candidates to replace Ishiba debate at the Japan National Press Club.
– Friday, Sept. 26
0830 JST (2330 GMT/1930 EDT Thursday, Sept. 25) The Ministry of Internal Affairs and Communications releases September Tokyo CPI.
Mace News median: total CPI +2.7% y/y (range: +2.3% to +3.0%) vs. Aug +2.6%; core CPI (ex-fresh food) +2.6% (range: +2.2% to +2.9%) vs. Aug +2.5%; core-core CPI (ex-fresh food, energy) +2.9% (range: +2.5% to +2.9%) vs. Aug +3.0%
Consumer inflation in Tokyo, the leading indicator of the national average, is expected to have stabilized under 3% in September, up 2.6% on year in September in the core measure (excluding fresh food), after having eased to 2.5% in August from 2.9% in July in light of easing upward pressures on processed food prices as well as national and provincial fiscal support.
The year-on-year rise in the total CPI is also seen ticking up to 2.7% after slowing to 2.6% in August to 2.9% in July. The annual rate for the core-core CPI (excluding fresh food and energy), which is little affected by fluctuations in gasoline and heating oil prices, is estimated at 2.9% vs. 3.0% the previous month.
The expected uptick in the core CPI comes from a possible year-on-year increase in overall energy costs in September 2025 as the government’s nationwide subsidies for electricity and natural gas pushed down energy prices by 5.3% in September 2024. Meantime, the subsidies for retail gasoline and heating oil remains in place.
Unique to the Tokyo prefecture (one of 47 jurisdictions) are the inflation-soothing effects of the city’s free base charge in water for four months from June as well as free day-care services that have been upgraded this month (expanded to the first child of eligible families from their second child onward).
Lower inbound spending amid the firmer yen compared to its weakness seen last year is also helping ease upward pressures on consumer prices. Hotel fees in the central Tokyo areas rose 5.3% on year in August, gradually easing from 6.0% in July and 6.5% in June.
The current high inflation rate is not fully backed by domestic demand (wage-heavy services price hikes lag behind goods price gains) but largely pushed up by higher import costs. This means wage growth is not catching up with inflation and thus that underlying inflation, estimated by the Bank of Japan to be around 1.5%, is still below the bank’s 2% price stability target in the long run.
The Bank of Japan is in the process of normalizing its policy stance after a decade-long large-scale easing period through 2022 and is set to continue gradually raising the overnight interest rate from the current level of 0.5%.