Japan core consumer prices in Aug up 1.7% on year, below 2% for 8th month

[TOKYO] Japan’s core consumer inflation held steady near the central bank’s 2 per cent target in August, data showed on Friday (Sep 18)

The data came hours before the Bank of Japan raised interest rates to a 31-year high and signalled its readiness to keep pushing up borrowing costs. At the two-day meeting ending on Friday, the BOJ raised its policy rate to 1.25 per cent from 1 per cent by a 7-2 vote.

The core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 1.7 per cent in August from a year earlier, data showed, compared with a median market forecast for a 1.8 per cent gain. It followed a 1.8 per cent rise in July.

An index that strips away the effects of both volatile fresh food and fuel, which is closely watched by the BOJ as a better gauge of demand-driven price pressures, rose 1.9 per cent in August from a year earlier.

Core inflation has stayed below the BOJ’s 2 per cent target for eight straight months, as government subsidies aimed at curbing utility bills offset price hikes for a broad range of goods.

But rising fuel costs from the Middle East conflict and higher import prices from a weak yen have added price pressure to the economy, prodding warnings from the BOJ of the risk of an inflation overshoot.

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The BOJ’s latest move follows rate hikes by its European and US peers, highlighting central banks’ focus on global inflation risks caused by the Iran war-induced energy cost spike, expansionary fiscal policies and surging demand for AI investment.

It was the first hike in three months and takes interest rates closer to levels the BOJ deems neutral to the economy, marking another step away from decades of ultra-low rates that cemented the yen’s status as a cheap global funding currency. REUTERS