Japan releases a key inflation indicator, Tokyo Core CPI, on Friday. The indicator slowed to 2.2% in January due to energy subsidies, the first deceleration in four months. The market estimate for February is unchanged at 2.2%. Tokyo CPI is expected to rise to 3.1% from 2.9% in Januuary.
Japan releases a key inflation indicator, Tokyo Core CPI, on Friday. The indicator slowed to 2.2% in January due to energy subsidies, the firsut deceleration in four months. The market estimate for February is unchanged at 2.2%. Tokyo CPI is expected to rise to 3.1% from 2.9% in Januuary.
With underlying inflation trending higher, the BoJ is expected to continue to rise interest rates. Governor Kazuo Ueda has repeatedly stated that rate hikes will continue if inflation stays sustainable at the BoJ’s 2% target.
The Bank wants to see inflationary pressures stemming from strong wage growth and domestic demand. The 5% wage hikes at the recently-concluded national wage negotations is a step in the right direction.
Ueada weighs in on rising inflation
Ueda said on Wednesday that Japan’s “very high” inflation was driven by temporary factors such as rising food prices, which were not sustainable and thus not a reason to respond with a rate hike.
However, Ueda said that the BoJ would raise rates if the increases in food costs resulted in “broad-based inflation across the economy” and that underlying inflation is heading towards the 2% but is still “a bit short”.
