The core Tokyo consumer price index (CPI) recorded a year-on-year increase of 2.0% in September, a decrease from the 2.6% rate observed in August, as reported by Statistics Japan. This trend may suggest a reduction in the likelihood of further rate hikes from the Bank of Japan. The core CPI figure excludes certain volatile charges, particularly those related to fresh food.
Meanwhile, the core-core Tokyo CPI, which also excludes energy costs, noted a slight rise of 1.6% on a year-over-year basis in September. In contrast, the headline CPI experienced a year-on-year uptick of 2.2%. The Bank of Japan aims for an annual core CPI target of 2%. The consumer price index for the expansive Tokyo metropolitan area is regarded as a significant precursor to the national CPI report, which is set to be released in mid-October.
Notably, rising food prices have continued to burden consumers in Tokyo, which rose by 3.4% compared to the previous year in September. In this context, the cost of rice surged an astonishing 41.4% year-on-year, a contentious issue due to the heavy influence of government regulations on staple output.
Conversely, egg prices experienced a decline, falling by 11.2% in September relative to the previous year. Further analysis of service costs in Tokyo revealed a modest increase of 0.6% on a year-over-year basis for September. This metric is crucial as services tend to exhibit stickiness in pricing, reflecting underlying trends in wage growth.
Additionally, residential rental costs in the city also rose by 0.6% on a year-over-year basis during this period. During its most recent policy meeting held on September 19, the Bank of Japan opted to maintain its interest rates at a steady 0.25% for short-term deposits and set a ceiling of 1% for 10-year Japanese government bonds. Minutes from the central bank meeting that took place on July 31, which were released earlier this week, highlighted a divide among board members regarding the necessity of implementing further rate hikes.
Notably, Kazuo Ueda, the governor of the Bank of Japan, has indicated that the central bank does not face immediate pressure to make hasty decisions regarding interest rates. This climate of moderate price increases and government actions may shape the future landscape of monetary policy in Japan..