Japan’s “core-core” inflation, closely monitored by the Bank of Japan (BOJ), rose to 2.4% in November—the highest since April—up from 2.3% the previous month.
This measure excludes both fresh food and energy prices, highlighting underlying price trends.
Meanwhile, core inflation, which excludes fresh food only, reached 2.7%, surpassing October’s 2.3% and beating economists’ forecasts of 2.6%.
Despite the rising inflation figures, the BOJ held its benchmark interest rate at 0.25% during its latest meeting, defying market expectations for a 25-basis-point hike.
The decision was made with an 8-1 board vote, with member Naoki Tamura dissenting and calling for an immediate hike due to increasing inflation risks.
Governor Kazuo Ueda emphasized that underlying inflation was increasing at “a moderate pace” but acknowledged the risks of delaying rate hikes, which could necessitate sharper increases in the future.
Yen Under Pressure as Inflation Rises
The yen weakened against the U.S. dollar following the BOJ’s rate decision, reaching 157.92 on Friday—its lowest since July—before regaining some ground.
Analysts, including Masahiko Loo, senior fixed income strategist at State Street Global Advisors, noted that further yen depreciation, potentially nearing 160, could prompt intervention by Japan’s finance ministry.
Loo described the BOJ as “super sanguine” about inflation and growth but suggested Governor Ueda remains cautious, focusing on uncertainties such as global market shifts.
These developments hold significant implications for Japan’s economic strategy and broader business environment as inflation continues to outpace forecasts.
With rising consumer prices and currency fluctuations, the BOJ faces increasing pressure to adjust its policy in the coming months.
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