Tokyo Core CPI Beats Forecast, Bolsters Case for September BOJ Hike
Tokyo's core-core inflation hit 2.0% in August, nearing the BOJ's target, while wholesale prices surged 7.2%. The data strengthens the case for a rate hike at the Sept. 17-18 meeting.
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Tokyo core consumer prices rose 1.8% in August from a year earlier, beating the median market forecast of 1.7%, data released Friday showed. The reading followed a 1.7% increase in July.
An index that strips out both fresh food and fuel costs, a measure the Bank of Japan watches closely, rose 2.0% in August, up from 1.8% the prior month. Tokyo data typically leads nationwide inflation by several weeks.
Wholesale inflation accelerated to 7.2% in July, a sharp increase analysts attributed to cost pressures from the Middle East conflict. Because wholesale price changes feed through to consumer prices with a lag, the July spike implies further upward pressure on headline and core readings in the months ahead, analysts said.
The data arrives ahead of the BOJ's next policy meeting on Sept. 17-18. The central bank raised its benchmark rate to 1% in June, the highest in 31 years, and held steady in July with its strongest language yet on inflation risks. According to sources cited by Reuters, the BOJ is positioned to raise rates as soon as September, and policymakers are weighing a more aggressive tightening pace than the roughly twice-yearly cadence maintained so far.
The yen strengthened after the release, briefly breaching 145 per dollar before paring the move. Traders holding short yen positions face added risk of a squeeze if the BOJ delivers a hawkish surprise, particularly as the Federal Reserve is expected to begin cutting rates later this month.
The BOJ's next policy decision is scheduled for Sept. 18.
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