Tokyo Core Inflation Accelerates, Approaching BOJ Target Amid Rising Energy Costs

Core inflation in Tokyo accelerated for the third consecutive month in August, reaching an annual rate of 1.8% as prices continued to rise driven by steady increases in food items.

The data, which is considered a leading indicator of nationwide trends, exceeded market forecasts and brought the city's core consumer price index (CPI) closer to the Bank of Japan's (BOJ) 2% target.

According to government data released on August 28, the Tokyo core CPI rose by 1.7% in July and a further 0.1 percentage point in August, with an index stripping away the effect of fresh food and fuel increasing by 2.0% in August after a 1.8% gain in July.

The rise in prices is attributed to the ongoing Middle East conflict, which has driven up energy costs, as well as a weak yen and robust demand for AI-related products.

While government fuel subsidies have kept core consumer inflation below the BOJ's target, experts warn that broader price increases are likely due to the second-round effects of rising energy costs.