Japan Core-Core Inflation Hits 1.9% as Markets Price 70% Odds of BOJ Rate Hike
Updated
Updated · Financial Times · Aug 21
Japan Core-Core Inflation Hits 1.9% as Markets Price 70% Odds of BOJ Rate Hike
3 articles · Updated · Financial Times · Aug 21
Summary
Japan’s core-core inflation rose to 1.9% in July from 1.6% headline inflation in June-era readings, marking its first strengthening in nine months and adding pressure on the Bank of Japan before its September meeting.
Higher oil and commodity costs, especially “naphtha-flation,” lifted prices of detergent, plastic bags and other everyday goods as Middle East war-driven energy costs filtered through consumer products.
Core inflation, which excludes fresh food, climbed to 1.8% from 1.6%, while headline inflation also reached 1.9%, keeping price growth near the BOJ’s 2% target and reinforcing views it may raise rates by 0.25 point to 1.25%.
Markets now assign about a 70% chance of a September hike, with traders also linking tighter policy expectations to support for the yen after Japan’s roughly $85 billion joint currency intervention with the US in July.
The BOJ raised rates to 1% in June and held steady in July, but its hawkish guidance that core CPI could move clearly above 2% later in fiscal 2026 has shifted expectations toward an earlier next increase.