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2026-09-18 07:58:09
[Japan's CPI nears 2% target, central bank expected to raise interest rates to 1.25%] (1) Japan's consumer price index (CPI) excluding fresh food rose 1.7% year-on-year in August, slightly lower than July's 1.8%, but still close to the Bank of Japan's 2% target; the index excluding fresh food and energy prices rose 1.9% year-on-year, unchanged from July, indicating strong underlying inflation. (2) The market generally expects the Bank of Japan to raise interest rates by 25 basis points at its policy meeting later that day, raising the benchmark interest rate to 1.25%; the market has largely priced in the expectation of a September rate hike. (3) The focus has shifted to the pace of the Bank of Japan's next move. Policymakers pointed out that the impact of the Middle East conflict, yen volatility, and demand related to artificial intelligence are potential factors that could push up inflation. (4) Overnight index swaps indicate that the probability of another rate hike by the end of this year is about 65%.
