According to data released on Friday, Japan’s core inflation remained stable in August and exceeded the central bank’s 2% target for a record 17 consecutive months. This is a symptom of broader pricing pressure and might strengthen the case for ending the country’s ultra-easy monetary policy.
The information is released hours before the Bank of Japan’s (BOJ) two-day policy meeting, which started on Thursday, comes to an end.
Markets are paying close attention to any indications from Governor Kazuo Ueda on when the BOJ might start to reduce stimulus, even though it is largely assumed that ultra-easy monetary conditions will remain in place.
According to data released on Friday, Japan’s core inflation remained stable in August and exceeded the central bank’s 2% target for a record 17 consecutive months. This is a symptom of broader pricing pressure and might strengthen the case for ending the country’s ultra-easy monetary policy.
The information is released hours before the Bank of Japan’s (BOJ) two-day policy meeting, which started on Thursday, comes to an end.
Markets are paying close attention to any indications from Governor Kazuo Ueda on when the BOJ might start to reduce stimulus, even though it is largely assumed that ultra-easy monetary conditions will remain in place.
The so-called “core core” index, which eliminates the impact of both volatile fresh food and gasoline costs, increased at the same annual rate in both July and August, rising 4.3%.
The BOJ will need to update its inflation predictions at its October meeting, according to Capital Economics economist Gabriel Ng, who noted that inflation has been persistently sticky.
In conclusion, we believe BoJ Governor Ueda will take this window of opportunity while inflation is still above its 2% objective to overturn the ultra-loose monetary policy regime established by his predecessor.
Core inflation slowed down after peaking at 4.2% in January as the effects of last year’s high increases in gasoline and raw material prices faded.
However, other analysts claim that because food prices have been rising steadily, the slowdown has not been as significant as anticipated and may instead prolong the period of inflation beyond the BOJ’s objective.
In response to escalating inflationary pressure, the BOJ is rumored to be about to end its policy of negative short-term interest rates and a 0% ceiling on the yield on its 10-year bonds.
The BOJ has downplayed the likelihood of gradually ending its enormous stimulus program, stating that before it can consider raising interest rates, recent cost-driven price hikes must turn into demand-driven increases in inflation.
Also Read | Experts predict UAW strike will cost 150,000 jobs and the contract itself