Japan's trend inflation index hits 3-year high, bolstering case for BOJ rate hike
TLT•Japan's BOJ underlying inflation index rose 3.2% year over year in September, its fastest pace in three years, while service-sector inflation reached 3.7%. The data comes ahead of a BOJ meeting where rates are expected to stay at 1.25%.
1. Underlying inflation accelerates
The BOJ’s index of underlying inflation, which excludes institutional factors such as education and energy-related subsidies, rose 3.2% in September from a year earlier, up from 2.6% in August. It was the biggest annual increase since October 2023.
2. Service prices rise
A separate BOJ gauge showed service-sector inflation rose 3.7% year over year in September, following a revised 3.5% increase in August. Economist Kenichiro Ahara said the data showed companies passing on prices at the business-to-business level, reflecting this year’s wage negotiations. Ocean freight transport costs rose 97.7%, with the weak yen and Middle East conflict boosting fuel import costs.
3. BOJ meeting ahead
The data comes ahead of a BOJ policy meeting ending Friday. The central bank is expected to hold its policy rate at 1.25% while signaling readiness to raise borrowing costs further. The BOJ has said it considers underlying inflation when deciding the pace and timing of future rate hikes.
