Japan’s September CPI is expected to firm, with headline inflation seen at 2.1% year on year versus 1.9% in August. Core CPI excluding fresh food is also forecast at 2.1% versus 1.7%, while core CPI excluding fresh food and energy is projected at 2.3% versus 1.9%.
CPI Developments and Projections
With headline inflation and the core measure excluding fresh food and energy still tracking under the Bank of Japan’s 2026 projection of 2.5%, expectations for faster policy normalisation remain constrained.
Monetary Policy Outlook and Market Impact
Swaps imply less than 5% odds of a 25 bps rate increase to 1.50% on 30 October, but place the probability of a hike at 80% for 18 December; against that policy backdrop, USD/JPY is seen staying within a 155.00–160.00 range in the near term.
