Japan's overall inflation rate in October fell to 2.3%, the lowest level since January, down from 2.5% in September.
The core inflation rate excluding fresh food prices is 2.3%, down from 2.4% in September. However, this figure is slightly higher than the 2.2% expected by economists surveyed by Reuters.
The Bank of Japan has long stated that its goal is a 'virtuous cycle between wages and prices.'
Another independent inflation measure, the 'core-core' inflation rate excluding fresh food and energy prices, rose to 2.3%, up from 2.1% in September. The Bank of Japan is also tracking this indicator.
According to LSEG data, as of November 22, 55% of economists surveyed by Reuters expect the Bank of Japan to raise interest rates by 25 basis points at the December meeting, which would bring the central bank's benchmark policy rate to 0.5%.
Takeshi Minami, an economist at Norinchukin Research Institute, stated: 'Apart from the electricity and gas sectors, inflation remains stable, partly due to rising import costs and general consumption. I believe the Bank of Japan will raise rates again in December.'
The slowdown in price growth is mainly attributed to the intermittent fiscal assistance measures taken by the Japanese government to offset the effects of inflationary pressure. Last year, the Japanese government removed subsidies, a move that had previously raised the inflation rate at that time.
In October, the increase in electricity prices slowed to 4% from 15.2% in September, while the growth in gas prices also eased. Utility subsidies reduced overall inflation by 0.54%.
According to a report by Reuters, on November 18, Bank of Japan Governor Kazuo Ueda stated that the Japanese economy is moving towards sustained wage-driven inflation and warned against keeping borrowing costs too low.
In the latest summary of opinions, the Bank of Japan also stated that if prices and the Japanese economy develop as expected, the policy rate could reach 1% in the second half of fiscal 2025 at the earliest.
Lorraine Tan, head of Asian equity research at Morningstar, stated that while core inflation has eased, 'core-core' inflation is on the rise. The company still expects the Bank of Japan to continue to 'gradually raise' interest rates and added that the Bank of Japan will seek to maintain the yen's 'stability' through monetary policy.
She noted that if the yen depreciates too much against the dollar, 'it could increase inflationary pressure' as many input costs are denominated in dollars.
In November, the yen weakened against the dollar, hitting a four-month low of 156.74 on November 15. However, the yen subsequently rebounded slightly against the dollar.
Article forwarded from: Jin Shi Data