Tokyo, Japan – The headline inflation rate in Japan fell to 2.3% in October, marking its lowest level since January and a decline from the 2.5% recorded in September. The core inflation rate, which excludes fresh food prices, also decreased to 2.3% from the previous month’s 2.4%. Despite this decrease, it was slightly higher than the 2.2% anticipated by economists surveyed by Reuters.
The Bank of Japan has consistently aimed for a “virtuous cycle between wages and prices,” emphasizing the importance of a balanced relationship between the two. With the recent weak inflation reading, it is likely that the central bank will continue to maintain an accommodative monetary policy stance.
Based on data from LSEG, a majority of economists polled by Reuters predict that the BOJ will raise rates by 25 basis points at its December meeting, potentially bringing the benchmark policy rate to 0.5%. Governor Kazuo Ueda of the BOJ expressed optimism about the economy’s trajectory towards sustained inflation driven by wage growth. Ueda also cautioned against keeping borrowing costs excessively low, highlighting potential risks associated with such a strategy.
In its latest summary of opinions, the BOJ indicated that if economic conditions unfold as anticipated, the policy rate could potentially reach 1% by the latter half of the 2025 fiscal year. This projection aligns with the central bank’s long-term goals of achieving stable inflation and economic growth. The evolving situation suggests a shift in monetary policy may be on the horizon, with implications for both consumers and businesses alike. Keep an eye out for further developments as this story progresses.