Kapronasia: Japan's inflation could increase the confidence of the Bank of Japan to raise interest rates

On December 20th, Jinshi data, Nomura Securities stated that the rise in Japan’s inflation rate should enhance the confidence of the Bank of Japan, leading it to believe that it can resume raising interest rates in the coming months. Assistant economist Toh Au Yu stated that the rise in overall inflation is mainly due to the gradual cancellation of subsidies for electricity and natural gas. He added that the supplementary budget proposed for next year includes plans to update energy subsidies, which should suppress energy inflation. Core inflation can better reflect the underlying situation. In the past two years, except for fresh food and energy items, inflation has remained above or at the 2% target level, except for one month. The Bank of Japan implies that it hopes for a clearer situation, especially in the labor market, before raising interest rates again. “Today’s (CPI) data should bring it closer to this decision.”