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Recap – Tokyo inflation accelerates, keeping BoJ under pressureCore inflation in Tokyo quickened in October, staying well above the Bank of Japan’s 2% target and reinforcing market expectations that policymakers may move toward another rate hike in coming months.Data released Friday showed the core consumer price index (excluding fresh food) rose 2.8% year-on-year, above forecasts for 2.6% and accelerating from 2.5% in September. The core-core measure (excluding food and energy) also climbed 2.8%, highlighting persistent price pressures despite government subsidies fading.The gains were driven mainly by higher food costs — including a 38% jump in rice prices — while service-sector inflation remained subdued at 1.6%, suggesting companies are still slow to pass on labour costs.The release came a day after the BoJ kept its policy rate unchanged at 0.5% in a 7–2 vote, with dissenters warning of rising inflationary risks. Analysts said the latest data support the view that the central bank could raise rates early next year if domestic demand strengthens.Separate figures showed factory output rose 2.2% in September, beating expectations, while the jobless rate held steady at 2.6%, underscoring continued resilience in Japan’s economy.
This article was written by Eamonn Sheridan at investinglive.com.
đź’ˇ DMK Insight
Tokyo’s inflation hitting above the BoJ’s 2% target is a game changer for traders. With core inflation accelerating, the pressure mounts on the Bank of Japan to consider rate hikes sooner rather than later. This could lead to a stronger yen as traders adjust their positions in anticipation of tighter monetary policy. If the BoJ does act, it could shift the dynamics in the forex market, particularly against the USD and EUR, which have been buoyed by their own central banks’ policies. Watch for the upcoming economic data releases that could further influence the BoJ’s decision-making process. On the flip side, if the BoJ remains dovish despite rising inflation, it could lead to a sell-off in the yen as traders lose confidence in its ability to combat inflation effectively. Keep an eye on the 2% inflation benchmark; a sustained breach could trigger significant market reactions. For now, monitor the USD/JPY pair closely, especially if it approaches key resistance levels, as any shift in sentiment could lead to volatility.
đź“® Takeaway
Watch the USD/JPY pair closely; a sustained inflation rate above 2% could trigger a rate hike from the BoJ, impacting forex positions.
