An in-line print is unlikely to move the yen much on its own, but it removes one possible dovish surprise before Friday’s decision and keeps the backdrop supportive of December hike pricing.
Steady services inflation strengthens the case for the Outlook Report to effectively declare underlying inflation has reached 2%, which would support the yen and short-end JGB yields
The bigger moves are still likely to come from the BoJ’s vote split, Ueda’s press conference and Wednesday’s Fed decision. Oil-driven cost pressure tied to the Iran conflict keeps the wider inflation backdrop firm. — Earlier: BoJ preview: MUFG sees hold but a 2% inflation call, with two dissenters the key yen risk Japan services PPI preview: 3.7% pace in focus ahead of Friday’s BoJ decision — Japan’s firms are still passing on service costs at a two-year-high pace, handing the BoJ one more piece of evidence for the 2% declaration markets expect this week. Summary: Japan’s services producer price index rose 3.7% y/y in September (expected 3.7%, prior 3.7%) That holds the annual pace at its highest in more than two years The index tracks prices companies charge each other for services and is watched for wage pass-through Goods producer price inflation slowed to 6.8% in September from 7.6% The BoJ meets October 29-30 and is expected to hold at 1.25%, with a December hike the consensus call Focus is on whether the Outlook Report effectively declares underlying inflation has reached 2% Japan’s services producer price index rose 3.7% year on year in September, in line with expectations and matching August’s pace, Bank of Japan data showed on Tuesday.
That keeps the annual rate at its highest in more than two years, just days before a BoJ policy meeting where the bank’s assessment of inflation is expected to matter more than the rate decision itself. The index, also known as the corporate services price index, tracks what companies charge each other for services such as transport, communications