BOJ Interest Rate Hike Odds Rise Amid Tokyo Inflation Surge
The Bank of Japan (BOJ) faces a tougher decision on interest rates after inflation in Tokyo accelerated, putting further hikes in view. According to the latest business survey, the BOJ has room to wait, but strong pressure on prices keeps another increase possible.
The core consumer price index for Tokyo increased 2.7% from a year earlier in September, compared to 1.8% in August. The measure excluding fresh food and energy rose to 3.0% from 2.0%. This jump was partly due to the removal of water bills and childcare subsidies.
The BOJ needs to assess how much pressure will persist but higher prices across everyday goods give it a reason to keep another rate increase on the table. The Tankan survey released on October 1 provides a more balanced picture of growth, with confidence among large manufacturers rising to 24 from 22, while confidence among large non-manufacturers dropped to 35 from 37.
The BOJ policymakers disagree over the pace of tightening, with some favoring faster increases if inflation exceeds the outlook and others seeing no need for haste. The policy rate currently stands at about 1.25%, and the next meeting takes place on October 29-30.