BOJ Rate Hike Decision Looms as Japanese Inflation Remains Steady

The Japanese consumer price index (CPI) remained steady in August at 1.7% year-over-year, while core inflation unexpectedly fell to 1.9% from 2% in July. This development comes just hours before the Bank of Japan's (BOJ) rate hike decision, where a 25 basis point increase is widely expected.

The BOJ has signaled that it would discuss rate hikes in its September meeting, citing increasing inflationary pressures from the war in the Middle East. The central bank has now hiked rates by a cumulative 1.1% since it began unwinding over a decade of ultra-loose policy in 2024.

The core CPI reading, which excludes fresh food prices, grew slightly below expectations at 1.7%. However, the print is closely watched by the BOJ as a gauge of underlying inflation. The steady increase in spending on food and discretionary items was offset by subsidies on utilities and fuel.