Annual core inflation in Tokyo accelerated to 2.7 per cent in September from a year earlier, government data showed on Friday — the fastest pace in 10 months and a reading that strengthens the case for further interest rate hikes by the Bank of Japan.
The numbers
The core consumer price index for the capital, which excludes fresh food but includes fuel costs, rose from a 1.8 per cent gain in August and came in above the 2.4 per cent median market forecast. It was above the BOJ's 2 per cent target for the first time since January, and the fastest year-on-year pace since November's 2.8 per cent.
An index that strips away both fresh food and fuel — closely watched by the BOJ as a better gauge of trend inflation — rose 3.0 per cent in September after a 2.0 per cent gain in August.
What is driving it
The jump reflects mounting price pressure from a weak yen, the Middle East conflict and robust AI-related demand, alongside a recent spike in wholesale inflation. Government fuel subsidies had kept core consumer inflation below the BOJ's target; their effect is fading.
Tokyo inflation is widely regarded as a leading indicator of nationwide trends, and the data will feed into the BOJ's fresh quarterly inflation forecasts due at its next policy meeting on October 29-30.
Rate outlook
The BOJ raised interest rates to a 31-year high last month, with its governor signalling the central bank has entered a new phase focused on preventing inflation from overshooting its target — opening the door to further hikes. While markets see little chance of a back-to-back move in October, many expect the bank to raise its policy rate again in December.
Sources:
Reuters: Tokyo core inflation jumps in September, bolsters case for more BOJ hikes
The Japan Times: Tokyo inflation hits 2.7% in September
The numbers
The core consumer price index for the capital, which excludes fresh food but includes fuel costs, rose from a 1.8 per cent gain in August and came in above the 2.4 per cent median market forecast. It was above the BOJ's 2 per cent target for the first time since January, and the fastest year-on-year pace since November's 2.8 per cent.
An index that strips away both fresh food and fuel — closely watched by the BOJ as a better gauge of trend inflation — rose 3.0 per cent in September after a 2.0 per cent gain in August.
What is driving it
The jump reflects mounting price pressure from a weak yen, the Middle East conflict and robust AI-related demand, alongside a recent spike in wholesale inflation. Government fuel subsidies had kept core consumer inflation below the BOJ's target; their effect is fading.
Tokyo inflation is widely regarded as a leading indicator of nationwide trends, and the data will feed into the BOJ's fresh quarterly inflation forecasts due at its next policy meeting on October 29-30.
Rate outlook
The BOJ raised interest rates to a 31-year high last month, with its governor signalling the central bank has entered a new phase focused on preventing inflation from overshooting its target — opening the door to further hikes. While markets see little chance of a back-to-back move in October, many expect the bank to raise its policy rate again in December.
Sources:
Reuters: Tokyo core inflation jumps in September, bolsters case for more BOJ hikes
The Japan Times: Tokyo inflation hits 2.7% in September