Tokyo Core Inflation Falls Below 2%, Posing Challenge for Japan's Rate Policy
Japan: Tokyo’s core inflation rate in October fell below the Bank of Japan’s 2% target for the first time in five months, according to data released on Friday. The core consumer price index (CPI), which excludes fresh food costs, rose by 1.8% year-on-year, down from 2% in September, though slightly exceeding the market forecast of 1.7%.
The deceleration in Tokyo’s core inflation and a slowdown in services inflation could challenge the Bank of Japan’s plans to further raise interest rates. The data has cast doubt on the Bank’s expectations that wage increases would help sustain inflation at its 2% target level. A secondary inflation index, which also excludes fuel costs, showed a 1.8% increase in October, up from 1.6% in September, suggesting a mixed inflation trend.
Tokyo’s inflation trends are closely observed as a preview of broader national inflation patterns. The October data, which includes biannual price revisions by Japanese firms, is key to assessing if demand-driven price increases are sufficient to support additional rate hikes.
Source: Reuters