Tokyo inflation exceeds expectations, raising prospects of a 25-basis-point rate hike in December

Tokyo inflation exceeded expectations and rose significantly compared to last month, putting pressure on the short end of Japanese government bonds and flattening the yield curve. Traders believe there is not enough basis for a rate hike this month, but the likelihood of a hike is now very close. In December, a 25 basis point rate hike is almost certain. The USD/JPY exchange rate edged lower.