Tokyo's 23-ward core CPI rose 1.8% year on year in August, marking a third consecutive month of accelerating growth. The result offset the downward pressure from electricity prices and supported expectations of an early BOJ rate hike.
Tokyo's 23-ward core CPI, an advance indicator of nationwide consumer prices, rose 1.8% year on year in August. The rate of increase accelerated from the previous month for the third consecutive month, and the data were seen by the market as supporting expectations of an early BOJ rate hike.
The increase was driven mainly by higher medical care fees and durable goods for education and recreation, while downward pressure was also seen from energy, including factors related to the increase in the ceiling on high-cost medical expense benefits, communication charges, and food excluding fresh food.
Market expectations for interest rates continue to point to a rate hike at the next monetary policy meeting in September, with the interest-rate swap market pricing in a hike at the September meeting with a probability of approximately 85%. The BOJ deputy governor indicated an emphasis on discussions going forward.
As concerns over upside risks to prices intensify, moves to correct the yen's weakness are expected to continue against the backdrop of coordinated intervention by Japan and the United States, further strengthening expectations of a rate hike in September.