Core inflation in Tokyo climbs 2.4% Year-on-Year in August

Tokyo inflation surge: Core consumer prices in Tokyo surged 2.4 per cent in August compared to the same month last year, marking the fourth consecutive month of acceleration. This rise continues to fuel market speculation about potential interest rate hikes in the near future.

Tightening strategy persists

The persistent inflationary pressures strengthen the case for the Bank of Japan (BOJ) to persist with its monetary tightening strategy. 

The August increase in the core consumer price index (CPI), which excludes volatile fresh food prices, exceeded both the median market forecast of 2.2 per cent and the 2.2 per cent rise observed in July.

Another key inflation gauge, which excludes both fresh food and fuel costs, rose 1.6 per cent in August, up from a 1.5 per cent increase in June. This broader price trend indicator is closely monitored by the BOJ.

Tokyo's inflation data is seen as an early signal of nationwide trends.

Shift from stimulus

Following the end of negative interest rates in March and a short-term policy rate hike to 0.25 per cent in July, the BOJ has taken significant steps away from its decade-long aggressive stimulus measures.

BOJ Governor Kazuo Ueda indicated that further rate increases are possible if inflation remains on track to consistently hit the 2 per cent target in the coming years, as projected by the BOJ board. 

The central bank anticipates that rising wages will drive up service prices, sustaining inflation around the 2 per cent mark.

(With Reuters Inputs)