BOJ Set for Rate Hike as Japan's Core Inflation Holds Near Target

Japan's core inflation remained steady near the Bank of Japan's (BOJ) 2 per cent target in August, fueling expectations for a near-term interest rate hike. The data showed that the core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose by 1.7 per cent year-over-year.

This follows a 1.8 per cent rise in July and marks the eighth consecutive month that inflation has stayed below the BOJ's target. Rising fuel costs from the Middle East conflict and higher import prices due to a weak yen have added pressure on the economy, prompting warnings of an inflation overshoot.

The BOJ is expected to raise interest rates this week, with analysts predicting a hike to 1.25 per cent and future tightening if price pressures continue to rise. This move would mark the first rate increase in two years and would bring interest rates to their highest level since 1990.