Tokyo Inflation Rises 1.8% as Rate Hike Probability Grows

Tokyo's consumer price index excluding fresh food rose 1.8% in August from a year earlier, marking the third consecutive month of acceleration. The Japanese Ministry of Internal Affairs and Communications attributed the increase to higher costs for medical treatment, rents, and durable goods used for education and recreation.

The Bank of Japan is now facing strengthened pressure to raise interest rates in September or October, a move traders currently price at an 82% probability. Deputy Governor Ryozo Himino stated that the central bank should pay greater attention to upside price risks than in the past, citing persistent yen weakness as a primary inflation risk.

Overall energy prices fell 2% during the period, following orders from Prime Minister Sanae Takaichi for the cabinet to maintain government subsidies on gasoline, electricity, and natural gas to lower the cost of living for citizens.