The yen is the most direct channel for a surprise. A firmer-than-expected reading would likely lift yen strength and push Japanese government bond yields higher as traders add to December hike bets. A softer print would tend to weigh on the yen and could support Japanese equities, particularly exporters. With the BoJ decision following within hours, any move on the data may be short-lived, or amplified, depending on the central bank’s tone.
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Tokyo inflation is expected to ease only slightly, leaving it comfortably above target and keeping a December BoJ hike firmly in the conversation.
Summary:
- Tokyo CPI for October is due at 23:30 GMT (8:30 am Tokyo, 10:30 am Sydney)
- Core CPI, which excludes fresh food, is expected at 2.6% y/y, against 2.7% in September
- The prior headline reading was 2.7%; CPI excluding food and energy was 3%
- The BoJ is expected to hold at 1.25% later in the day, with December still in play
- Japanese jobs data lands at the same time; the BoJ Outlook Report follows at 03:00 GMT
Tokyo consumer price data for October lands just hours before the Bank of Japan announces its policy decision on Friday. It gives markets one last read on inflation as policymakers weigh the timing of their next rate hike.
Core inflation in the capital, which excludes volatile fresh food prices, is expected at 2.6% year on year, slightly below September’s 2.7%. Even at that level, the measure would remain above the central bank’s 2% target. The data are due at 23:30 GMT, or 8:30 am in Tokyo.
Two other measures will help markets judge the breadth of price pressures. Headline Tokyo inflation ran at 2.7% in September, while the gauge that strips out both food and energy stood at 3%. That second measure is often treated as a guide to underlying inflation because it removes the items most exposed to swings in commodity prices and weather. A reading that holds near 3% would suggest domestic price pressures remain firm, even if the core figure eases slightly.
The Tokyo numbers matter beyond the capital. They are published weeks ahead of the nationwide figures and are widely used as an early indicator of where national inflation is heading. That gives them extra weight when they land on the same day as a policy meeting.
The BoJ is widely expected to keep its policy rate at 1.25% later in the day, with attention focused on whether officials signal a move at the December meeting. A core reading at or above the 2.7% prior would likely support the case for tightening before the end of the year. A sharper drop than forecast could encourage expectations that the central bank will wait longer.
- BOJ preview: Daiwa sees hold, but 2% inflation call could open door to December hike
- BoJ preview: MUFG sees hold but a 2% inflation call, with two dissenters the key yen risk
- BOJ to hold at 1.25%, but Ueda signals further hikes toward neutral
- BOJ seen lifting rates to 1.50% in December as 69% of economists expect a Q4 hike
- BOJ reportedly may upgrade inflation forecast, hold rates steady at next week’s meeting
Labour market figures for September are released at the same time, with the jobless rate expected to hold at 2.5%. The BoJ’s quarterly Outlook Report, due at 03:00 GMT, will then show how the central bank’s own inflation forecasts compare with the latest data.
This article was written by Eamonn Sheridan at investinglive.com.