A Tokyo core print at or above 2.4% would reinforce expectations of a follow-up BOJ hike and could support the yen and push short-dated Japanese government bond yields higher, while a miss would give weight to the two board members who argued against the September increase. Because Tokyo leads the national figures by about three weeks, traders tend to read it as a preview of the nationwide trend. For oil, the link runs through import costs: higher crude prices tied to Middle East tensions have been one of the forces lifting Japanese prices, so any further energy spike would add to the BOJ's inflation concern. The jobs data is unlikely to move markets unless it surprises materially, with a tight labour market already assumed.
Two weeks after hiking, the BOJ is about to find out whether Tokyo prices back its decision, with forecasts pointing to core inflation leaping well beyond target.
Summary:
Tokyo consumer inflation data for September, due on Friday, is expected to show a sharp pickup in core price growth, a result that would add to the case for further Bank of Japan tightening only two weeks after its latest rate rise.
Core CPI for the Tokyo area, which excludes fresh food, is forecast to rise 2.4% from a year earlier, up from 1.8% in August. That would take the measure clearly above the central bank's 2% target. Headline Tokyo CPI rose 1.9% in August, while the core-core measure, which strips out both food and energy and is closely watched as a gauge of underlying inflation, was 2.0%. The figures are scheduled for release at 2330 GMT on Thursday, or 8.30 am Friday in Tokyo.
Tokyo data is published about three weeks ahead of the nationwide figures and is treated as a leading indicator for national inflation, which for September is due later this month.
The release comes after the BOJ raised its policy rate to 1.25% on 18 September in a 7-2 vote, with two board members dissenting on the grounds that inflation was still running below 2%. According to its policy statement, the central bank judged underlying inflation to be approaching its target, flagged upside risks from shifting wage and pricing behaviour and rising inflation expectations, and signalled it would continue raising rates if its outlook is realised. A strong Tokyo print would strengthen the majority view and weaken the dissenters' argument that price growth had not accelerated enough.
Price pressures have been building from higher import costs tied to Middle East tensions and a weaker yen, partly offset by government fuel subsidies and other support measures.
Japan's August labour market data is due at the same time. The unemployment rate is expected to hold at 2.4%, with the jobs-to-applicants ratio forecast steady at 1.18, meaning there are about 118 openings for every 100 job seekers. Monetary base data for September follows at 2350 GMT, after a 15.7% annual contraction in August that reflects the BOJ's ongoing balance sheet reduction.
The Tokyo core reading is the key release, with the gap between the expected 2.4% and the BOJ's 2% target likely to shape how quickly markets price the next move.
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ps. New Zealand's ANZ-Roy Morgan consumer confidence index for September is released, comes in at 97.6, after a reading of 98 in August, still below the 100 level that separates optimism from pessimism.
This article was written by Eamonn Sheridan at investinglive.com.
Source: Investing Live - News
