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Tokyo CPI Surges in November, Bolstering BOJ’s Next Rate Hike
The Tokyo CPI, a key leading indicator of Japan’s inflation, surged significantly in November, according to data released by Japan’s Ministry of Internal Affairs and Communications on November 29.
Tokyo’s CPI rose 2.6% year-on-year in November, marking a sharp increase of 0.8 percentage points from the previous month. This rise was primarily attributed to the removal of energy subsidies implemented by former Prime Minister Fumio Kishida in November, which drove energy prices up by 7.4% year-on-year, an increase of 4.9 percentage points from the prior period.
The core CPI, which excluding fresh food, grew by 2.2% year-on-year, up 0.4 percentage points from the previous month. Meanwhile, the core-core CPI, which further excludes energy, increased by 1.9% year-on-year, up 0.1 percentage points from the previous month, marking its second consecutive month of growth.
Services prices, another metric closely watched by the Bank of Japan, rose 0.9% year-on-year, up 0.1 percentage points from the prior month and also marking a second consecutive month of acceleration. This reflects rising wage growth expectations driving companies to increase service prices.
Despite nominal base wages in Japan reaching a 31-year high, real total wages have seen two consecutive months of negative growth since July, indicating that inflation continues to erode consumers’ purchasing power.
As a predictor of nationwide inflation, Tokyo’s core CPI remains above the Bank of Japan’s 2% target, signaling persistent inflationary pressures. BOJ Governor Kazuo Ueda has reiterated that the central bank will continue to implement rate hikes if economic and inflation trends align with its projections.
The rise in inflation has also significantly heightened expectations for a December rate hike by the BOJ. According to Bloomberg, swap market data indicates a roughly 60% probability of a 0.25% hike in December, double the likelihood recorded before the data release.
