One of the Bank of Japan's indicators for measuring potential inflation is still higher than the central bank's target of 2%, supporting general expectations for a rate hike in September. The Bank of Japan said on Tuesday that the consumer price index rose 2.3% year on year in July. By contrast, the government core inflation rate announced last week increased by only 1.8%. These data are one of the new price indicators introduced by Governor Ueda Kazuo in March to reflect core inflation trends in more detail. These metrics exclude specific factors, including the impact of government gasoline and utility subsidies, which tend to distort overall CPI data. This reading further confirms signs that potential inflationary pressure is still strong, as companies are passing on higher investment costs to customers due to rising energy prices due to the Middle East conflict. This also supports the Bank of Japan's statement that it is necessary to be highly alert to the risk of rising inflation. Traders expect that when the Bank of Japan announces its next policy decision on September 18, the probability of interest rate hikes will be around 80%.

One of the Bank of Japan's indicators for measuring potential inflation is still higher than the central bank's target of 2%, supporting general expectations for a rate hike in September. The Bank of Japan said on Tuesday that the consumer price index rose 2.3% year on year in July. By contrast, the government core inflation rate announced last week increased by only 1.8%. These data are one of the new price indicators introduced by Governor Ueda Kazuo in March to reflect core inflation trends in more detail. These metrics exclude specific factors, including the impact of government gasoline and utility subsidies, which tend to distort overall CPI data. This reading further confirms signs that potential inflationary pressure is still strong, as companies are passing on higher investment costs to customers due to rising energy prices due to the Middle East conflict. This also supports the Bank of Japan's statement that it is necessary to be highly alert to the risk of rising inflation. Traders expect that when the Bank of Japan announces its next policy decision on September 18, the probability of interest rate hikes will be around 80%.