Tokyo CPI Holds Steady as Core Inflation Inches Closer to BOJ Target

Tokyo's Consumer Price Index (CPI) inflation remained steady in August, despite expectations of a slight drop. According to data from the Statistics Bureau, CPI rose 1.8% year-on-year in August, matching forecasts and remaining largely unchanged from the revised 1.7% rise seen in the prior month.

The core reading, which excludes volatile fresh food prices, fell to 1.9% in August from 2.0% in July. This print is closely watched by the Bank of Japan (BOJ) as a measure of underlying inflation.

The mild decline in inflation was driven mainly by a surging Japanese yen, after the U.S. and Japan jointly intervened in currency markets to support the currency. A stronger yen helped bring down some import costs, but overall Japanese inflation remained largely sticky, with food and living costs continuing to rise.

Government subsidies on consumer fuel and gas prices helped limit the inflationary effects of surging global oil prices due to the Iran conflict. However, rising energy costs are expected to trickle back into CPI inflation, especially as producer price index inflation rose sharply in recent months. Businesses are expected to pass on higher fuel costs to consumers.