Tokyo Inflation Hits Fastest Pace in a Year, Supporting BOJ
The pace of price growth in Tokyo picked up, backing the central bank’s economic outlook a week after authorities raised the benchmark rate for a third time under Governor Kazuo Ueda.
Consumer prices excluding fresh food in the capital climbed 2.5% in January from a year earlier, the fastest pace since last February, according to the ministry of internal affairs Friday. The data matched the median estimate of economists. Japan’s factory output fell 1.1% compared to the previous year in December and retail sales rose 3.7%, according to the industry ministry.
The latest Tokyo inflation figures, a leading indicator for the national trend, indicate that inflationary pressure remains elevated, an outcome that supports the Bank of Japan’s decision last week to raise borrowing costs to the highest level since 2008. Friday’s batch of indicators largely fits in with market speculation that there may be another rate hike in about six months.
In separate data released Friday, the labor market appeared to remain tight as the jobless rate slightly decreased to 2.4%, and jobs to applicant levels remained at 1.25, meaning there were 125 job openings for every 100 job seekers.
According to economists surveyed by Bloomberg, July is the most likely timing for the BOJ’s next rate hike, with September seen as the next most likely month for action. In a risk scenario, the rate change could come as early as April, according to 45% of the surveyed analysts.
Gains in Tokyo’s cost of living were led by processed food prices as the cost of rice surged from a year earlier.
The central bank surprised many economists by upgrading its quarterly inflation projections more than expected last week. For all three fiscal year outlook periods through March 2027, the BOJ for the first time expects inflation to be at or above its price target of 2%.
Source: Bloomberg
