Japan’s consumer inflation accelerated in September, reaching its highest level in nine months and strengthening expectations for another interest rate increase by the Bank of Japan (BoJ) before the end of the year. Excluding fresh food, consumer prices rose 2.1 percent year-on-year, up from 1.7 percent in August, according to government data released on Friday. This matched economist forecasts and marked the first time inflation surpassed the BoJ’s 2 percent target since December last year.

Economists said the rise in inflation was notable given that fresh food prices experienced a significant slowdown and energy costs continued to decline, partly due to government subsidies. Abhijit Surya, economist at Capital Economics, noted that these factors underscore the persistent underlying inflationary pressures in the economy.

The BoJ’s policy board is widely expected to maintain its current interest rates at its upcoming meeting next week, allowing more time to assess the impact of earlier rate hikes, including the one implemented in September. Alongside the decision, the central bank is also set to release its quarterly economic and price projections, which will be closely watched for guidance on the future path of monetary policy.

Kento Minami, economist at Daiwa Securities, indicated that reaching the 2 percent inflation target shifts the central bank’s stance, requiring it to pay closer attention to upward risks to prices. “If the outlook report continues to highlight upside risks to prices, that would provide a basis for considering an early interest rate hike,” Minami said.

Several factors are contributing to sustained inflationary pressures in Japan. A persistently weak yen has increased the cost of imported raw materials, while rising global oil prices have further pushed up consumer costs. Additionally, the BoJ has identified demand related to the artificial-intelligence sector as another factor potentially fueling inflation.

Market participants widely anticipate that the BoJ may raise its benchmark rate by 25 basis points to 1.5 percent during a meeting before year-end as it seeks to balance the need to control inflation against risks to economic growth. However, the immediate focus remains on the upcoming policy meeting and the updated outlook report to better gauge the central bank’s next moves.