Tokyo Inflation Nears BOJ Target as Rate Hike Expectations Mount

The Tokyo core inflation rate has accelerated for the third consecutive month in August, according to data released on Friday. The annual core inflation in Tokyo rose 1.8 percent from a year earlier, slightly above market forecasts of 1.7 percent and nearing the Bank of Japan's (BOJ) 2 percent target.

The rise in the Tokyo core consumer price index was driven by steady price increases in food items, following a 1.7 percent gain in July. The BOJ will scrutinize this data at its next policy meeting set for September 17 to 18, when most market players expect a hike in the policy rate to 1.25 percent.

Masato Koike, senior economist at Sompo Institute Plus, believes that there is little reason for the BOJ to wait until October and projects the bank to raise rates next month due to renewed escalation in the Middle East conflict which is likely to push up energy costs with second-round effects seen leading to broader price increases.