Bags of rice are stacked at a supermarket in central Tokyo on November 22, 2024.
Richard A. brooks | AFP | Getty Images
Japan's measure of inflation, which the Bank of Japan closely monitors, reached a seven-month high in November, which could prompt the central bank to raise interest rates early next year.
The so-called “core” inflation rate, which excludes fresh food and energy prices and is tracked by the Bank of Japan, rose to 2.4% from 2.3%It is its highest level since April.
Core inflation – which does not include fresh food prices – was 2.7%, up from 2.3% in October and above the 2.6% forecast of economists polled by Reuters.
The headline inflation rate rose to 2.9% from 2.3%, reaching its highest level since August.
The readings come the day after Bank of Japan keeps interest rates steady at 0.25% It surprised economists who had expected a 25 basis point increase.
The Bank of Japan said in its statement on Thursday that the suspension decision was a split decision of 8-1, with board member Naoki Tamura calling for a 25 basis point hike.
Tamura sees inflation risks becoming more skewed to the upside, and suggested the bank could raise interest rates during the meeting.
Bank of Japan Governor Kazuo Ueda reportedly said at a press conference on Thursday that since core inflation is only increasing at a “moderate pace,” the Bank of Japan may be slow to raise interest rates.
However, Ueda added that the central bank was aware that if it waited too long to raise interest rates, it would have to accelerate rate hikes at future meetings.
The Bank of Japan “will resume its tightening cycle soon,” Marcel Thiliant, head of Asia-Pacific at Capital Economics, said in a statement after the decision. Capital Economics expects a rise in January after a new set of economic forecasts emerged.
“It is worth noting that, unlike in October, the decision to leave interest rates unchanged was not unanimous,” Thiliant added, referring to Tamura’s vote to raise interest rates to 0.5%.
