The Bank of Japan has gone ahead with its first rate hike in three months. The move is aimed at addressing upside risks to prices, but upward pressure on inflation remains strong, driven by soaring crude oil prices amid concerns over a prolonged Middle East situation and expanding demand related to artificial intelligence. At a press conference on the 18th following the monetary policy meeting, Governor Kazuo Ueda noted that inflationary pressure originating from high crude oil prices and other factors is likely to spread to a broad range of items, and expressed a sense of urgency that the underlying rate of inflation risks rising above the 2 percent price stability target. The domestic corporate goods price index rose 7.6 percent in August from a year earlier, exceeding 7 percent for the third straight month. According to Teikoku Databank, the number of food and beverage items scheduled for price increases in September reached 4,923, more than triple the figure a year earlier, and the annual total is expected to exceed 20,000 items. The government's support for electricity and city gas rates ending with September usage is also expected to push prices higher.
BOJ raises its policy rate for the first time in three months, pushing JGB yields up and bond prices down.
