Commerzbank: Japan Should Hike Rates to Counter Inflation Pressures

The Japanese Yen has been trading within a narrow range against the US Dollar at around 159.35, but rising pressures are building following an acceleration in Tokyo inflation data.

Tokyo's headline CPI reached 1.9% in August, and service sector price gains hit nearly a one-year high, causing market odds for a Bank of Japan interest rate hike in September to surge.

According to Commerzbank, Tokyo's inflation metrics confirm that price pressures in Japan have firmly reached the central bank's 2% target, particularly across underlying service categories.

Failing to raise rates in September would risk undermining JPY stability, and Commerzbank warns that anything else would likely put the Japanese Yen under significant pressure.