Japanese headline inflation dipped to a 10-month low of 2.3% in October, down from 2.5% in the previous month. When volatile fresh food prices are excluded, the core inflation rate also registered at 2.3%, a decrease from September’s 2.4%, although it modestly surpassed economists’ prediction of 2.2%. This weaker inflationary pressure could indicate that Japan’s central bank will need to keep its monetary policy relaxed.
Another measure of inflation, recognized as the core-core inflation that excludes the prices of fresh food and energy, inched up to 2.3% from September’s 2.1%. The Bank of Japan also keeps a keen eye on this metric.
A survey conducted by Reuters on November 22 revealed that just slightly above the 50% of economists expect the Bank of Japan to increase rates by 25 basis points in its December meeting, elevating the benchmark policy rate to 0.5%.
Echoing the forecast, Bank of Japan Governor Kazuo Ueda mentioned that the economy is on track toward sustained wage-driven inflation on November 18. He also expressed caution over maintaining overly low borrowing costs. Additionally, the Bank of Japan stated in its recent summary of opinions that if the economic and price developments align with its expectations, the policy rate could climb to 1% by the latter half of fiscal 2025.
