Catenaa, Friday, February 21, 2025 – Japan’s headline inflation rose by 4% year-on-year(y/y) in January, the highest recorded after January 2023, official data said on Friday, putting the Bank of Japan(BOJ) on the path of more rate hikes.
Data showed that Japanese inflation has accelerated more than expected in January, with consumer prices excluding fresh food rising 3.2% from a year earlier, which is also the biggest gain since June 2023.
The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is closely monitored by the BOJ, climbed slightly to 2.5% from 2.4% in the month before.
The headline inflation, which was at 3.6% in December, has now remained above the BOJ’s 2% target for 34 straight months with January data.
Immediately after the data release, the yen strengthened 0.15% to trade at 149.39 against the dollar.
The more-than-expected inflation rate has put supporting bets for more rate hikes by the BOJ, with traders pricing in a roughly 84% chance of a 25bps increase in July.
BOJ’s January meeting summary said it will be necessary for the bank to adjust the degree of monetary accommodation from the viewpoint of avoiding the yen’s depreciation and the overheating of financial activities, both of which appear to be due to excessively high expectations of continued monetary easing.
Reuters reported that BOJ Governor Kazuo Ueda said on Friday, the central bank stands ready to increase government bond buying if yields rise sharply.
Yields on 10-year Japanese government bonds, which had scaled a 15-year high of 1.447% in the previous session on rate-hike expectations, fell to 1.402% Friday, after having risen for the past four days.
