Prices in Tokyo's 23 wards accelerated in August, with core CPI moving closer to the BOJ's 2% target. Expectations for a BOJ rate hike have strengthened, putting the outcome of its next meeting in September in focus.
According to consumer price data for Tokyo's 23 wards in August released by the Ministry of Internal Affairs and Communications, core CPI, which excludes volatile fresh food prices, rose 1.8% from a year earlier. Growth accelerated from 1.7% in July.
The core-core index, which excludes fresh food and energy, rose to 2.0% in August, while the headline index rose to 1.9%. Price trends in Tokyo serve as a leading indicator for the national trend and as an input into the BOJ's policy decisions.
Although movements in the yen and government subsidy measures have provided some relief from import costs, views are spreading that elevated wholesale prices and sticky core inflation will support the BOJ's normalization process.
Market participants point to the possibility that the BOJ could consider a policy move as early as September, and are also discussing the possibility of exceeding a pace of two rate hikes a year. The focus going forward will be on how the factors considered at policy meetings develop and on the course of prices.