Japan Consumer Inflation Picked Up in August Amid BOJ Rate Hike View — Update

By Megumi Fujikawa

TOKYO--Japan's consumer inflation grew at a faster pace in August and stayed well above the Bank of Japan's 2% target amid expectations for an additional rate increase in the near term.

Overall consumer prices rose 3.0% in August from a year earlier, compared with July's 2.8% growth, government data showed Friday. The pace of price increases in food and household durable goods picked up during the month.

The solid readings came a few hours before the central bank's rate decision. The BOJ is widely expected to keep interest rates on hold at the end of the two-day meeting later Friday.

The BOJ had in July raised the interest rate to 0.25% from a range of 0%-0.1%.

Analysts said the central bank could take a breather this month as the yen's recent appreciation would likely ease upward pressure on import prices.

The yen has strengthened recently as the Federal Reserve's entry into an easing cycle and the prospect of the BOJ's further rate increases have heightened expectations for a narrowing interest-rate gap.

The yen was trading at 142.70 versus the dollar early Friday in Tokyo, compared with a three-decade low of 162.00 in early July before the BOJ's rate increase.

However, the BOJ is expected to raise interest rates again in the near future as inflation remains above the bank's 2% target.

Consumer inflation will likely remain close to the BOJ's 2% target until early 2025, said Marcel Thieliant, the Head of Asia Pacific at Capital Economics.

"Underlying inflation should remain around 2% over the coming months, prompting another rate hike by the Bank of Japan at its October meeting," Thieliant said.

According to a survey by the Japan Center for Economic Research released earlier this week, 19 of the 36 economists polled expect the central bank to raise rates in December.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

September 19, 2024 21:00 ET (01:00 GMT)

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