Japan CPI data suggests no early rate rise

Japanese consumer prices rose less than expected in September compared with a year earlier to harden expectations that the Bank…

Japanese consumer prices rose less than expected in September compared with a year earlier to harden expectations that the Bank of Japan will delay raising interest rates again until early next year.

The yen and bond yields fell after government data showed the core consumer price index, excluding volatile fresh food prices, was 0.2 per cent higher in September than a year earlier.

Market forecasts had centred on a rise of 0.3 per cent.

In July, the BOJ raised its target for the overnight call rate to 0.25 per cent from zero, the first rate rise in Japan in six years. Most analysts expect the central bank to raise interest rates again by the end of the fiscal year next March, but some have been betting on a move by December.

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No shift is expected at a policy board meeting next Tuesday, but traders will be looking for clues on the timing in the BOJ's twice-yearly outlook report on the economy and prices to be released on the same day at 3 pm (local time).

The timing and pace of interest rate rises are seen as critical by financial markets since the rate differential between Japan and its trading partners helped cut the yen's traded-weighted value to a 21-year low in September.