The data, which is considered a leading indicator of nationwide trends, came in the wake of Bank of Japan Deputy Governor Ryozo Himino’s warning over mounting inflationary risks that reinforced market expectations of a near-term rate hike.
Core consumer prices in Tokyo rose 1.8 percent in August from a year earlier, government data showed, slightly above market forecasts for a 1.7 percent gain and creeping near the BOJ’s 2 percent target.
The rise in the Tokyo core consumer price index, which excludes volatile fresh food costs, followed a 1.7 percent rise in July and was driven by steady price increases in food items.
An index stripping away the effect of fresh food and fuel, which is closely watched by the BOJ as a better gauge of trend inflation, rose 2.0 percent in August after a 1.8 percent gain in July.
The data will be among factors the BOJ will scrutinise 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.
“A renewed escalation in the Middle East conflict is likely to push up energy costs with the subsequent second-round effects seen leading to broader price increases,” said Masato Koike, senior economist at Sompo Institute Plus.
“There’s little reason for the BOJ to wait until October,” he said, projecting the bank to raise rates next month.
After raising its key interest rate to a 31-year high of 1 percent in June, the BOJ kept monetary policy steady in July but issued its strongest comments to date about mounting inflation risk.
A recent spike in wholesale inflation, which reached 7.2 percent in July from a year earlier, has highlighted mounting price pressure from the Middle East conflict that will likely push up consumer prices with a lag, analysts said.
While refraining from pre-committing to a September hike, deputy governor Himino on Thursday stressed the need for timely rate hikes with a focus on the risk of an inflation overshoot. (Reuters)
