Tokyo Inflation Slows Due to Subsidies, BOJ Remains on Track for Rate Hikes
Inflation in Tokyo has slowed sharply, primarily due to government utility subsidies, but it keeps policymakers on track for further interest rate hikes as it remains well above the Bank of Japan's (BOJ) target.
Consumer prices excluding fresh food rose 2.5% in the capital in August from a year earlier, versus 2.9% in the previous month, the Ministry of Internal Affairs and Communications said on Friday. The slowest pace of increase since March matched economists' forecasts. A deeper price indicator—which also excludes energy—rose 3%, down from 3.1% and in line with expectations. For overall inflation, energy prices contributed a negative 0.29 percentage point.
Constrained by temporary factors, the leading indicator of national price trends is unlikely to destabilize the BOJ's current rate hike path. Market speculation of a move this year has increased in recent weeks, driven by remarks by US Treasury Secretary Scott Bessent and signs of solid economic and price growth.
Economists expect the central bank to hold interest rates at its meeting ending September 19. Prices of rice—a staple food driving Japanese inflation this year—rose 67.9% year-on-year, slowing from 81.8% in July after starting to surge about a year ago. Posting the largest monthly increase in half a century earlier this year, surging rice inflation forced the government to implement extraordinary measures to cool it, including the release of emergency stocks.
Food prices (excluding fresh produce) rose 7.4%, unchanged from July's pace. Service prices rose 2%, compared with 2.1% in the previous month, indicating that underlying inflationary pressures remain stable. The strength of inflation is increasingly difficult to gauge due to one-off factors. Prime Minister Shigeru Ishiba's government decided to reinstate utility subsidies for July–September, a policy that is starting to show up in August's CPI data. (ayu)
Source: Newsmaker.id
