(Bloomberg) -- While Japan’s weakest inflation figures in more than two years support the case for more central bank stimulus, they are unlikely to provide a sufficient tipping point for Bank of Japan action later this month, economists say.Energy prices pushed Japan’s key inflation gauge down to 0.3% in September, far from the central bank’s 2% goal as it prepares for a review of prices later this month. Some economists see the review as a signal that a ramping up of stimulus is likely in the works.But the last nationwide price figures before the meeting matched expectations across the board, offering no clear trigger for BOJ action. Take out the impact of cheaper energy and volatile fresh food and prices are rising 0.5%. That’s a level the central bank could argue is a sign of continued upward price momentum.
A sales tax hike at the beginning of October is set to complicate the inflation picture, making it less easy to grasp the underlying price trend, a factor that could enable the central bank to argue its case both ways: in favor of action or against.The 2 percentage point increase in the tax on non-essential items could boost CPI by up to 1 point, but the downward impact of government measures to make pre-school education free will offset that gain. Then there’s the response of retailers to consider.“It will get tricky from here because of the sales tax hike. I think many retailers won’t raise prices because they will expect the tax hike to make households want to save money while some may try to raise prices by taking advantage of the hike,” said Taro Saito, director of economic research at NLI Research Institute.The complexity of the tax impact is likely to leave the BOJ with plenty of wiggle room for interpretation.