Overview
- Nationwide July data showed core CPI up 1.8% year‑on‑year and the core‑core measure (ex food and energy) at 1.9%, reinforcing a broadening inflation trend.
- Markets have pushed the odds of a September rate increase to just under 80% and expect the BoJ to raise its policy rate to about 1.25% at the Sept. 17–18 meeting.
- The Bank of Japan already raised rates to 1.0% in June and left policy unchanged in July while warning of rising price pressures, and sources say it may speed up further hikes after an initial September move.
- Economists say a weaker yen and higher import costs tied to Middle East tensions have driven much of the recent pass‑through to consumer prices, while government fuel and utility measures have partly muted headline readings.
- A sustained rise in core‑core inflation would give the BoJ stronger justification to tighten and could push long‑dated government bond yields higher, raising borrowing costs for firms and households and shaping markets ahead of the September meeting.