Bank of Japan's price trend indicator jumps above 3%, providing grounds for further rate hikes.

The Bank of Japan's gauge of underlying inflation rose to the highest level in three years, far exceeding the bank's 2% target and providing grounds for the authorities to continue raising interest rates. A report released by the Bank of Japan on Tuesday showed that consumer prices excluding fresh food and special factors rose 3.2% year-on-year in September, accelerating from 2.6% the previous month. The result may reinforce market speculation of a near-term rate hike. The Bank of Japan had previously raised borrowing costs to 1.25% in September, the fastest pace of tightening since 1990. The market widely expects the Bank of Japan to keep policy unchanged this Friday, although many predict it may announce that underlying inflation has finally reached its 2% targetmore than 13 years after the target was established. Surveys show that more than 80% of economists expect the Bank of Japan to raise rates at its December meeting. None of the economists surveyed expect action this Friday. Special factors affecting the data include the Japanese government's subsidies for gasoline and utilities. These measures, aimed at easing the cost-of-living crisis, slowed the pace of consumer price increases. Data released by the Japanese government last week showed that consumer prices excluding fresh food rose 2.1% year-on-year in September. Recent data support the Bank of Japan's strategy of continuing to raise its benchmark interest rate. Data released earlier on Tuesday showed that Japan's services producer price index rose, affected by the Middle East conflict. Bank of Japan Governor Kazuo Ueda said this month that he can no longer tolerate rising underlying inflation because it is already very close to 2%, signaling his intention to continue raising rates.