Aug 29, 2024 1 min read links

Link: Inflation accelerates beyond forecasts in Tokyo, boosting case for rate hike

Inflation in Tokyo accelerated in August, reinforcing the case for the Bank of Japan to continue raising rates gradually. Consumer prices, excluding fresh food, rose 2.4%, up from 2.2% in July, exceeding the consensus estimate.

Tokyo’s data is a leading indicator for national figures due in September. After the July rate hike, BOJ Governor Kazuo Ueda indicated potential future increases if price trends align with projections.

However, Ueda is cautious about moving too quickly, considering the impact of unstable financial markets on inflation and the economy's slow recovery. Meanwhile, Japan’s jobless rate edged higher to 2.7%, and factory output grew by 2.8% in July, missing expectations.

Shinichiro Kobayashi of Mitsubishi UFJ Research and Consulting noted the recovery is slow, making an additional rate hike this year unlikely. Most economists predict another rate hike between October and January, despite recent market turmoil.

Taro Kimura of Bloomberg Economics suggested that the sharp rise in Tokyo’s inflation could prompt a rate hike in October. Rising energy prices and solid pay increases contributed to the inflation spike.

Policymakers hope that tight labor market conditions and higher wages will bolster households against inflation. With a leadership change in Japan’s ruling party approaching, candidates may propose measures to further boost the economy. #

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