FX.co ★ Tokyo Core Inflation Slows, But Stays Above BOJ Target

Core consumer prices in Tokyo's Ku-area increased by 2.9% in July 2025 compared to the same month last year. This marks the second consecutive month of easing and slightly falls short of market expectations, which stood at 3%. Despite the deceleration, inflation remains significantly above the Bank of Japan's target of 2%, sustaining prospects for a potential interest rate hike later in the year. Next week, the Bank of Japan is scheduled to convene and discuss its monetary policy direction, with market participants anticipating a potential upward revision of its inflation forecast for the current fiscal year in the upcoming quarterly outlook report. Nonetheless, concerns about economic growth continue to linger. In May, the central bank adjusted its GDP forecasts downward, attributed to the adverse impact of heightened US tariffs, which complicates the trajectory for future rate hikes. Nevertheless, the recent US-Japan trade agreement, which imposes a 15% tariff on Japanese exports to the US, has alleviated some of the uncertainties affecting the economic forecast.