Zhitong Finance APP noticed that data released by the Japan Bureau of Statistics on Friday showed that Tokyo's core consumer price index (CPI) inflation (excluding volatile fresh food prices) increased at an annualized rate of 2.7% in October. This data exceeds the expectation that inflation will remain at 2.5% in September.
The inflation rate in Tokyo, the capital of Japan, rose more than expected in October, and just a few days later, the Bank of Japan will hold a meeting. Investors expect the Bank of Japan to send more signals at the meeting, potentially changing its extreme dove policy.
The core index, which does not include fresh food and fuel prices, grew by 3.8% that month, still approaching its peak in 40 years, indicating that the potential inflation level in the Japanese capital is still very high.
The overall CPI rose by 3.3%, higher than the 2.8% increase in the previous month.
The continuous rise in food prices is a key factor in the rise in inflation data, and the rise in fuel costs caused by global oil prices is also one of the reasons. However, sustained spending on discretionary products and entertainment consumption has also driven up inflation, as Japanese consumers remain healthy despite increasing inflationary pressures.
Given that the Greater Tokyo region is by far the largest contributor to Japan's economic growth, CPI inflation in Tokyo is usually a precursor to national inflation.
Although inflation eased earlier this year due to government subsidies for electricity, this trend now seems to be reversing due to high food and energy inflation. The data released last week also showed that the national CPI growth in September was higher than expected.
Due to the increase in import costs, the significant depreciation of the yen (approaching a 33 year low) has also led to an increase in inflation.
A few days after Friday's data is released, the Bank of Japan will hold a meeting, and Tuesday's meeting will decide to keep negative interest rates unchanged.
But sticky inflation, the heavily hit yen, and rising bond yields are expected to prompt the Bank of Japan to further change its yield curve control mechanism, which traders largely see as a rate hike.
The Bank of Japan is also facing increasing pressure to consider abandoning negative interest rates, as the Japanese economy has remained resilient and inflation has been above the Bank of Japan's annual target of 2% for over a year.