Japan’s core inflation rose above the Bank of Japan’s (BOJ) 2% target in September, putting the central bank’s next decision in focus as the yen gave back some recent gains.
Statistics Bureau of Japan data showed the consumer price index (CPI) for all items rose 2.1% from a year earlier, after 1.9% in August. The measure excluding fresh food also advanced to 2.1%, from 1.7%, while the index excluding both fresh food and energy reached 2.4%, up from 1.9%. Reuters reported that higher fuel costs, yen-linked import prices and demand tied to AI were among the sources of price pressure.
The Fed’s target range of 3.75% to 4% remains above the BOJ’s overnight call-rate guideline of around 1.25%. The BOJ has said further rate increases will depend on economic activity, prices and financial conditions. Deutsche Bank strategist Shoki Omori told Reuters that “the carry against the dollar is intact.”
Most economists in a Reuters poll expected the BOJ to leave rates unchanged at its October meeting and raise them by a quarter point in December. Masato Koike, a senior economist at Sompo Institute Plus, told Reuters there was “little need for a back-to-back rate increase in October,” citing price rises that were not accelerating sharply.
Currency reports captured different Friday readings. Reuters reported the yen up 0.3% at ¥156.28 per dollar and on course for a 1% weekly gain. FXStreet reported at 1:09 a.m. ET (05:09 UTC) that USD/JPY had rebounded from around ¥156 and was struggling to hold above ¥157.
Reuters connected yen demand with market caution about AI investment and a broader move toward safer assets.
The Fed meets Tuesday and Wednesday, Oct. 27-28, followed by the BOJ on Thursday and Friday, Oct. 29-30. The U.S. Bureau of Economic Analysis (BEA) has scheduled its advance estimate of third-quarter gross domestic product and its September Personal Income and Outlays report, including the PCE price index, for Thursday, Oct. 29.
