Japan's core inflation rate rose to a seven-month high in November, potentially prompting the Bank of Japan (BOJ) to consider raising interest rates early next year. The BOJ maintained its current interest rate policy, but one board member advocated for an increase.
The core-core inflation rate, which excludes prices of fresh food and energy, rose to 2.4% in November from 2.3% in October, its highest level since April. The core inflation rate came in at 2.7%, up from the 2.3% seen in October and beating the 2.6% forecast by economists polled by Reuters. An inflation gauge in Japan that is closely watched by the Bank of Japan (BOJ) came in at a seven-month high in November, which could prompt the central bank to raise rates early next year.
The so-called 'core-core' inflation rate, which strips out prices of both fresh food and energy and is tracked by the BOJ, reached 2.7%. Bank of Japan held interest rates steady at 0.25%, The BOJ said in its statement on Thursday that the decision to hold was a split 8-1 decision, with board member Naoki Tamura advocating for a 25-basis-point hike. Tamura was of the view that inflation risks had become more skewed to the upside, and proposed that the bank hike interest rates during the meeting. BOJ Governor Kazuo Ueda reportedly said in a press conference Thursday that as underlying inflation was only increasing at 'at a moderate pace,' the BOJ could go slow in raising rates, he said. Ueda did add, however, that the central bank was mindful that if it waited too long to raise rates, it would have to quicken rate hikes in future meetings, Masahiko Loo, senior fixed income strategist at State Street Global Advisors, said that the inflation print is 'pretty much in line with what we think.' He added that the BOJ is 'super sanguine' on the country's inflation and growth figures, but Ueda was likely focusing on foreign uncertainties, namely, the impact of the incoming Donald Trump administration. The yen weakened against the U.S. dollar following the BOJ's decision to hold rates. It hit 15
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