Tokyo inflation accelerates in Sept, strengthening case for further BOJ hikes

Tokyo consumer inflation accelerated in September, with core prices rising faster than expected, reinforcing market expectations that the Bank of Japan (BOJ) may continue raising interest rates as price pressures remain persistent.

Tokyo’s core consumer price index (CPI), which excludes volatile fresh food prices, rose 2.7% year-on-year in September, accelerating from 1.8% in August and exceeding economists’ median forecast of 2.4%.
The broader Tokyo CPI also increased 2.7% from a year earlier, compared with 1.9% in August, while the index excluding food and energy rose 0.4% month-on-month after a 0.7% gain in the previous month.

The data, seen as a leading indicator of nationwide inflation trends, showed that underlying price pressures remain above the BOJ’s 2% target.

The data comes after the BOJ raised its policy rate to 1.25% in September, the highest level in more than three decades, and signalled that further tightening could be considered if inflation risks persist.

Recent BOJ discussions showed some policymakers favoured faster rate hikes to prevent inflation from overshooting its 2% target, though others urged caution given risks to consumption and growth.

The stronger Tokyo inflation reading is likely to keep markets focused on the pace of BOJ tightening.