Japan's core CPI rose 2.3% year-on-year in October, slightly above market expectations and providing reason for the Bank of Japan to raise interest rates next month. After today's data was released, the yen briefly appreciated by 0.4% against the US dollar, and the market has begun to reflect expectations for a rate hike. If the interest rate hike comes true, the unwinding risk of the yen carry trade may resurface, which may have an impact on global capital markets. (Previous summary: Japanese yen shock warning) Under Trump’s big dollar banner, Japan may be forced to accelerate interest rate increases. Where is the bottom line of the exchange rate? ) (Background supplement: Virtual asset tax reform) Japan’s cryptocurrency profits tax is planned to be reduced to 20%, and a number of tax reduction measures will be promoted) Japan’s Ministry of Internal Affairs and Communications announced October consumer price index (CPI) data today, and the results show: Core CPI (excluding fresh food prices only) increased by 2.3% year-on-year, slightly higher than market expectations of 2.2%, but down from 2.4% in September. This change is mainly due to the base period effect of last year's government cuts in fuel subsidies. The CPI index, which excludes fresh food and energy prices, rose at an annual rate of 2.3%, up from 2.1% in September, indicating continued demand-driven inflationary pressures. Additionally, service prices rose at an annual rate of 1.5% from 1.3% in September, reflecting the likelihood that companies will pass on rising labor costs to consumers. The data showed Japan's inflation rate remains above the Bank of Japan's 2% target, providing a reason for the central bank to raise interest rates next month. Will Japan raise interest rates next month? The Bank of Japan will hold an interest rate decision meeting on December 18-19. As of Nov. 22, 55% of economists predicted the Bank of Japan was likely to raise interest rates by 25 basis points at the meeting, taking the benchmark policy rate to 0.5% from 0.25%, according to a London Stock Exchange survey. Marcel Thieliant, head of Asia Pacific at Capital Economics, also believes that the Bank of Japan is likely to raise interest rates. He pointed out: "A renewed rise in underlying inflation, coupled with the recent rebound in consumer spending and the continued weakening of the yen, are all This provides sufficient impetus for the Bank of Japan to raise interest rates next month. "In addition, according to the latest summary of the Bank of Japan's opinions, if prices and economic performance are in line with expectations, the Bank of Japan may raise the policy interest rate to 1% as early as the second half of fiscal year 2025. However, Bank of Japan President Kazuo Ueda did not give clear guidance on the timing of raising interest rates. He said that as long as the Japanese economy can stably achieve its price target driven by strong domestic demand and steady wage increases, the Bank of Japan will be ready to raise interest rates again. Many economists expect that if the Bank of Japan does not raise interest rates at its next meeting, it may choose to raise the benchmark interest rate in January next year. Bloomberg economists further predict that the Bank of Japan may raise interest rates by 1% each in January, April and July next year, forming a tighter monetary policy path. Japanese yen carry trade may be liquidated. If the Bank of Japan decides to raise interest rates next month, it will be the second action after raising interest rates in July this year. In September, the Bank of Japan decided to keep interest rates unchanged, taking into account major factors including global economic uncertainty, financial market volatility, and the strengthening of the yen exchange rate. In particular, the volatility in financial markets still remains a source of fear. Looking back at the early August after the interest rate hike in July, global capital markets suffered a bloodbath. One of the reasons was the wave of liquidation of Japanese yen arbitrage traders. The logic of yen carry trade is to take advantage of Japan's low interest rate environment to borrow yen funds and invest in high-yield assets. However, when Japan raises interest rates: Borrowing costs increase and profit margins for carry trades shrink. At the same time, rising interest rates usually push the yen to appreciate, further increasing the exchange rate risk of carry trades. Under these dual pressures, a large number of arbitrage traders chose to close their positions, and the withdrawal of funds caused market liquidity to tighten, thus triggering a market collapse. Now, with the Bank of Japan likely to raise interest rates again next month, markets are starting to price in that expectation. For example, the yen appreciated as much as 0.4% against the dollar during the session following today's data. If the interest rate hike comes true, the yen may strengthen further, and we must pay close attention to the trends in global capital markets at that time. Related reports: Who is selling U.S. debt like crazy? Japan's Q3 sales hit a record high of US$61.9 billion, and China has reduced its holdings for three consecutive months. Is the bottom reached? The U.S. election storm is approaching, is the weak yen the best safe-haven asset? Japan's parliamentary election) The Liberal Democratic Party suffered a disastrous defeat and the yen hit a three-month low. Is Shigeru Ishiba likely to become the shortest-lived prime minister? The central bank is expected to delay an interest rate hike. "Japan's core CPI is higher than expected, will interest rates be raised in December? Be careful about the withdrawal of hot money from yen arbitrage trades." This article was first published on BlockTempo (Dong District Dong Trend - the most influential blockchain news) media).