Japan's Core Inflation Tops 2% Target, Strengthening Case for Another BOJ Hike

Price pressures in Japan are broadening, and that matters for global markets, crypto included.

The data

Japan's core consumer price index, which excludes fresh food, rose 2.1% in September from a year earlier, data showed Friday, according to Reuters reporting carried by CNA. That matched forecasts, sped up from 1.7% in August, and topped the Bank of Japan's 2% target for the first time in nine months. A narrower measure that also strips out fuel, watched closely by the BOJ, rose 2.4%, up from 1.9%.

Higher fuel costs tied to the Middle East conflict, a weak yen that raises import prices, and demand linked to AI all fed into the numbers.

What the BOJ may do

The BOJ raised its policy rate to 1.25%, a 31-year high, last month. Sources told Reuters it is likely to hold at its meeting ending Oct. 30 but may raise its inflation forecast. Many analysts polled by Reuters expect a move to 1.50% in December. "With little evidence that the tightening delivered so far has slowed the economy, the risks are shifting towards a higher peak in the policy rate," said Marcel Thieliant of Capital Economics.

Why it matters for crypto

The yen is widely borrowed to fund investments elsewhere, so expectations of higher Japanese rates can prompt investors to unwind those trades and sell risk assets. CoinDesk reported the yen briefly jumped to 156.07 per dollar after the data before slipping back toward 157, while bitcoin dipped below $81,000 and then recovered toward $82,000. Further BOJ hikes are a risk crypto traders will keep watching.