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

Tokyo consumer prices surged in September, surpassing expectations and supporting the argument for additional interest rate hikes by the Bank of Japan (BOJ). The core consumer price index (CPI), which excludes volatile food costs, surged 2.7% year-on-year, a marked increase from 1.8% in August. This acceleration exceeded economists' expectations of 2.4%.

The broader CPI also climbed 2.7% from a year ago, up from 1.9% in August, while the index, excluding food and energy, increased 0.4% month-over-month after a 0.7% gain the prior month. The data, acting as an early signal of nationwide inflation trends, demonstrated that inflation pressures remained above the BOJ's 2% objective.

The BOJ had already increased its policy rate to 1.25% in September, the highest level in over three decades, suggesting further tightening might be warranted if inflation concerns persist. Recent BOJ deliberations revealed differing views among policymakers, with some advocating for quicker rate hikes to avert inflation surpassing its 2% target, while others advocated prudence due to potential risks to consumption and growth.

The robust Tokyo inflation figure is anticipated to maintain market concentration on the speed of BOJ rate hikes.