Consumer prices in Tokyo climbed at a faster pace in September, with a key gauge of underlying inflation accelerating beyond analyst expectations and reinforcing the argument for additional monetary tightening by the Bank of Japan.
Core inflation in the capital, which strips out volatile fresh food prices but includes energy costs, rose 2.7 percent from a year earlier, according to government data released Friday. The reading marked a sharp pickup from August’s 1.8 percent increase and came in above the 2.4 percent median forecast from economists.
A narrower measure that excludes both fresh food and fuel — closely watched by the BOJ as a better indicator of trend inflation — advanced 3.0 percent on an annual basis, up from 2.0 percent the prior month.
Tokyo’s figures serve as a leading indicator for nationwide price trends and will feed into the central bank’s updated quarterly inflation projections, scheduled for release at its next policy meeting on October 29-30.
The acceleration comes as government fuel subsidies had previously kept core consumer inflation subdued relative to underlying pressures. More recently, a spike in wholesale prices has underscored mounting cost pressures tied to the Middle East conflict, a weak yen, and robust demand linked to artificial intelligence.
Last month, the BOJ raised its policy rate to 1.25 percent — the highest level in more than three decades. Governor Kazuo Ueda indicated the central bank has entered a new phase focused on preventing inflation from overshooting its 2 percent target, leaving the door open to further hikes.
Internal discussions at the BOJ have revealed a split among policymakers. Some members favored moving more quickly to raise rates in order to head off an inflation overshoot, while others urged caution, citing risks to consumption and broader economic growth.
The stronger-than-expected Tokyo reading is likely to keep market participants focused on the trajectory of BOJ policy in the months ahead.
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AloJapan.com