A Bank of Japan consumer-price gauge excluding fresh food and a range of
government measures rose 2.3% YoY in July, above the BOJ’s 2% target and
reinforcing market expectations of a September rate increase. By contrast, the
Japanese government’s core CPI excluding fresh food rose 1.8% YoY. The figures
are from the new suite of price indicators introduced by Ueda in March to track
underlying inflation. Higher energy costs linked to the Middle East conflict are
lifting firms’ input costs, which are being passed on to consumers, supporting
the BOJ’s view that upside inflation risks warrant vigilance. Market pricing
assigns roughly an 80% probability to a September hike.
