Bank of Japan faces potential rate hikes as core inflation accelerates

The Bank of Japan (BOJ) is facing increasing pressure to implement further interest rate hikes following an acceleration in core inflation. According to BOJ indicators, core CPI excluding fresh food rose by 2.6% year-on-year in August, up from 2.3% in July. A narrower metric excluding both food and energy also accelerated from 1.6% to 1.8%.

These figures differ from official government statistics, which reported a lower core inflation rate of 1.7%. The discrepancy is attributed to institutional factors, specifically government subsidies for energy and meals that mask underlying price pressures.

This trend follows the BOJ's recent decision to raise the reference rate from 1% to 1.25%. Market analysts suggest that a subsequent hike at the October meeting is a realistic scenario. This movement aligns with a broader global trend of central banks, including the Federal Reserve and the European Central Bank, adjusting monetary policies in response to geopolitical tensions, commodity prices, and economic strength.