The Bank of Japan's measure of underlying inflation accelerated last month and moved well above its target, providing justification for continuing to raise the benchmark interest rate.

According to a report released by the Bank of Japan on Friday, the consumer price index (CPI) excluding fresh food and special factors rose 2.6% year-on-year in August, accelerating from 2.3% in July. Special factors include government subsidies for gasoline and utilities.

The gauge excluding fresh food, energy, and special factors rose to 1.8% from 1.6% in July.

This follows the Bank of Japan's decision last week to speed up the pace of rate hikes and its emphasis on the risk that inflation could exceed the 2% target.

Japanese government data, meanwhile, show that the country's inflation rate is below the central bank's target, mainly due to government measures to curb the cost of living.

The inflation gauge published by the Bank of Japan on Friday, which strips out the impact of such factors, provides support for its stance of further raising rates.

The assessment of inflation strength has become particularly important after two board members voted against a rate hike last week.

Toshiro Asada and Ayano Sato, appointed by Prime Minister Sanae Takaichi, opposed the rate increase, weakening expectations for the Bank of Japan's hawkish stance and causing the yen to weaken. They cited inflation as the reason for opposing the hike.

Overnight index swap pricing shows that investors see a more than 90% probability of another Bank of Japan rate hike before December.

A survey of economists conducted before the September meeting showed that 58% of respondents believed January next year would be the timing for another rate hike, while about 35% thought the next increase would come in December.

The Bank of Japan will announce its next interest rate decision on October 30.