Japan Core Inflation Tops BOJ's 2% Target, Bolstering Case for Near-Term Rate Hike

Japan's core consumer inflation exceeded the Bank of Japan's 2% target in September for the first time in nine months, data showed Friday, reinforcing expectations for a near-term interest rate increase. The core CPI, which excludes volatile fresh food but includes fuel costs, rose 2.1% from a year earlier, accelerating from August's 1.7% gain and matching the median market forecast. The so-called "core-core" index stripping out both fresh food and fuel rose 2.4%, up from 1.9% in August. Goods prices climbed 2.8% year-on-year, while services inflation accelerated to 1.5% from 1.2%, signaling firms are passing on higher labor costs. The BOJ, which raised rates to a 31-year high of 1.25% last month, is expected to hold policy steady at its two-day meeting ending October 30 but may revise up its inflation forecast. Many analysts polled by Reuters expect the next hike to 1.50% in December, with a terminal rate around 1.75% to 2%.