Japan CPI accelerated from 2.6% yoy to 3.0% yoy in August, above expectation of 2.6% yoy. CPI core (ex-fresh food), rose from 2.4% yoy to 2.8% yoy, above expectation of 2.7% yoy. CPI core-core (ex-fresh food, energy), also rose from 1.2% yoy to 1.6% yoy, but missed expectation of 1.7% yoy.
CPI core, the BoJ watched reading, hit the highest level in 31 years since 1991, excluding the effect of sales tax hike. Even including the impact of sales tax, the reading was still the highest in nearly 8 years.
BoJ is widely expected to continue to stand pat, and maintain negative interest rate later this week. But there are expectations that core inflation could hit 3% later in the year, and stay above the 2% target in the near term. That might start to change BoJ’s view on prices and policy at a later stage.