Japan’s Service Inflation Keeps a BOJ Hike in Play
Japan’s SPPI remains firm near 3% as markets price a September BOJ hike, though softer momentum questions how quickly further tightening may follow.
Matt Simpson
- Securities
Japan’s Service Inflation Keeps a BOJ Hike in Play
By: Matt Simpson, Market Analyst
Japan’s service inflation remains persistent enough to support expectations for another BOJ hike in September, but softer near-term momentum offers little evidence that policymakers need to tighten again quickly.
Japan’s Service Inflation Supports Further BOJ Tightening
Source: Bank of Japan
Markets are increasingly expecting the Bank of Japan to raise interest rates again when it meets on 17-18 September, leaving the bigger question less about whether it hikes and more about what comes next.
A Reuters poll conducted earlier this week found 57% of economists expect the BOJ to raise its policy rate from 1% to 1.25% in September, with some already looking for another increase to 1.5% before year-end. Markets have leaned even more heavily towards a September move following persistent inflation, yen weakness and rising Japanese yields.
Market pricing puts the probability of a hike closer to 80%, shifting the focus towards the BOJ's guidance. A September hike without any indication of further tightening could leave the yen vulnerable to renewed weakness, although the MOF remains on standby should depreciation become too rapid or prolonged.
While the BOJ expects headline inflation to remain above 2%, the bigger policy question is whether domestic price pressures are becoming more persistent. Japan’s latest SPPI suggests they just might, although there is little evidence of renewed price acceleration.
SPPI Momentum Remains Elevated, But Has Cooled
Japan SPPI chart shows service inflation near 3% while three-month annualised momentum cools ahead of the September BOJ meeting.
Source: Source: Bank of Japan
- Japan’s headline SPPI rose 3.6% y/y in July, up from 3.4% in June, while ex-international transportation and high labour-cost services remained close to 3%.
- Transportation and postal services jumped 1.44% m/m and 6.41% y/y, helping lift the headline, though transport is more exposed to fuel, freight and external costs.
- More relevant for the BOJ is that domestic service inflation remains firm even after stripping some of that out.
- The broader trend remains firm, but recent momentum has softened.
- The three-month annualised rate for SPPI ex international transportation slipped to -0.35%, while high labour-cost services ran at just +0.70%.
Ultimately, the data point to persistent service inflation without renewed acceleration. That remains consistent with another BOJ hike, but offers little support for a rapid follow-up move.
Tokyo CPI is next and should provide a more timely read on whether consumer inflation is telling a similar story. Tokyo core CPI has historically tracked the national measure closely, so another firm reading would reinforce the case that underlying inflation remains persistent heading into the BOJ meeting.
Source: Statistics Bureau of Japan
Market Pricing Still Points to Further BOJ Tightening
Japan’s 2-year JGB yield has risen to around 1.7%, nearly 70bp above the BOJ’s 1% policy rate. That suggests markets are already pricing further tightening beyond September, leaving the BOJ’s guidance on the path towards 1.5% as the more important signal.
Source: TradingView
- Securities
This material should be construed as the solicitation of an account, order, and/or services and represents the opinions and viewpoints of the individual authors or presenters. It does not constitute an individualized recommendation or take into account the particular trading objectives, financial situations, or needs of individual customers.
The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.
References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.
StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. StoneX Financial (Canada) Inc. (SFCI) is registered in Canada and is a member of CIRO and CIPF. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.
R.J. O’Brien & Associates, LLC (RJO) is registered with the CFTC as a Futures Commission Merchant and is a member of NFA.
StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorized and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorized to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorized and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorized by the FCA.
This communication is issued in the European Economic Area by StoneX Financial Europe GmbH (SFEG). StoneX is the trade name used by STONEX GROUP INC. and all its associated entities and subsidiaries. StoneX Financial Europe GmbH (“SFEG”) is a securities trading firm registered in Germany under Company No. HRB 80844.
StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licence holder (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for domestic and cross-border money transfer services).
SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism.
StoneX Financial (HK) Limited (CE No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.
StoneX Financial Pty Ltd (ACN 141 774 727) holds an Australian Financial Service License (AFSL: 345646) for Dealing in Securities, Exchange-Traded Derivatives Contracts, OTC Derivatives Contracts and Foreign Exchange Contracts, and is regulated by the Australian Securities and Investments Commission.
StoneX Securities Co., Ltd. (“SSJ”) (Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
© 2026 StoneX Group Inc. All Rights Reserved.
Discover more insights
Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.
Related articles for Securities
Global Economy Edges Toward Stagflation As Inflation Embeds
Global economies are increasingly facing a shift where inflation proves more persistent even as growth begins to slow. Repeated supply shocks are no longer temporary disruptions but are starting to reshape expectations and policy responses.
Vincent Deluard
- Securities
Market Pullbacks Test Investors
Market pullbacks happen frequently, yet they continue to unsettle investors more than they should. Historical data shows these declines are a normal part of equity cycles rather than a sign of deeper market stress.
Editorial Team
- Securities
StoneX: We open markets
Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.
Reach
With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency
As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve, our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise
From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.