Japan’s core inflation rose to 3% in December, marking a 16-month high and reinforcing calls for a potential rate hike by the Bank of Japan (BOJ).
This increase matched economists’ expectations, as reported by Reuters, and outpaced November’s 2.7% rise. Core inflation, which excludes fresh food but includes energy, has now exceeded the BOJ’s 2% target for 33 consecutive months.
Headline inflation climbed to 3.6%, its highest level since January 2023, up from 2.9% in November. Meanwhile, the “core-core” inflation rate, which strips out prices for both fresh food and energy, remained steady at 2.4%.
The inflation data lands amid the BOJ’s policy meeting, set to conclude today, and could give the central bank more room to act.
The yen weakened slightly following the report, trading at 156.1 against the dollar. Economists anticipate the BOJ will raise its key policy rate by 25 basis points to 0.5%, a level not seen since 2008.
Public comments by BOJ Governor Kazuo Ueda have indicated that rate hikes are on the table. Ueda recently stated that the BOJ would adjust rates if “improvements in the economy and prices continue,” according to Reuters.
For businesses, the BOJ’s potential shift in monetary policy underscores the growing pressures from inflationary trends.
With inflation accelerating and policy tightening on the horizon, companies must navigate an evolving economic landscape.
Japan’s inflation surge signals a crucial juncture for the BOJ, as its decisions could reshape the country’s economic trajectory.
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