Data released on Friday showed that the annual core inflation rate in Tokyo, Japan's capital, for October far exceeded the Bank of Japan's 2% target. This result highlights growing price pressures and provides stronger support for further interest rate hikes.
The release of the above data coincides with the Bank of Japan's scheduled policy decision later on Friday. Although the Bank of Japan is expected to keep policy unchanged, it will likely emphasize its determination to continue raising interest rates to prevent inflation from climbing excessively.
Official data showed that Tokyo's core consumer price index, which includes fuel prices but excludes fresh food, rose 2.6% year-on-year in October, in line with the median market forecast. Previously, the index rose 2.7% in September.
After stripping out the effects of fresh food and fuel prices, the so-called "core-core" CPI — which is closely watched by the Bank of Japan as a more accurate gauge of inflation trends — rose 2.6% in October; the previous increase in September was 2.9%.
Tokyo's related data is regarded as a leading indicator of nationwide price trends in Japan. These figures corroborate the Bank of Japan's view that steady increases in producer prices will drive broader and more rapid growth in consumer inflation.
Last month, the Bank of Japan raised its policy rate to a 31-year high. Governor Kazuo Ueda signaled that the Bank of Japan has entered a new phase focused on preventing underlying inflation from exceeding the target, which also indicates the possibility of further rate hikes in the future.
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