In Japan, Tokyo’s headline CPI unexpectedly accelerated from 2.8% yoy to 3.3% yoy in October. CPI core, which excludes the volatile prices of fresh food, also witnessed an acceleration, moving from 2.5% yoy to 2.7% yoy. On the other hand, CPI core-core, which strips out impact of both food and energy prices, marginally slowed from 3.9% yoy to 3.8% yoy, but remained elevated.
An important metric to note is acceleration in services prices, which went from 1.9% yoy 2.1% yoy. The continued uptick in services inflation indicates a more entrenched and broad-based price pressure scenario, suggesting that it could be a prolonged period before inflation retraces its steps back below BoJ’s 2% target.
Considering that consumer inflation in Tokyo often sets the tone for national trends, the data bolsters the anticipation that BoJ might have to upgrade its inflation forecasts. Market participants are now keenly awaiting the fresh quarterly projections that are expected to be unveiled at BoJ’s policy meeting next week.
