Recent acceleration in Japan's underlying inflation, highlighted by Tokyo core-core CPI (excluding fresh food and energy) surging to 3.0% YoY in September from 2.0% in August amid Middle East-driven energy costs, yen weakness, and AI-related demand pressures, has reinforced BOJ vigilance. Traders assign 77.5% implied probability to a 2.0-2.4% outcome for the 2026 annual figure, reflecting expectations that these factors prove transitory and underlying CPI will stabilize near the 2% target as base effects and subsidies moderate pass-through. The Bank of Japan's September 25 basis point hike to 1.25% and October 29-30 meeting, alongside IMF projections of gradual policy normalization amid 0.7% 2026 growth, anchor sentiment around this range, with limited odds on higher bands absent sustained wage-price spirals.