Japan: drop in inflation rate in October, BoJ rate hike still on the agenda

Japan’s headline inflation rate fell to 2.3% in October, its lowest level since January and down from 2.5% seen in September.

The core inflation rate, which excludes fresh food prices, stood at 2.3%, down from 2.4% in September. This figure is, however, slightly higher than the 2.2% expected by economists polled by Reuters.

Japan’s central bank has long stated that its goal is to create a “virtuous circle between wages and prices.” Low inflation could therefore mean that the bank should continue to maintain an accommodative monetary policy.

According to LSEG data, 55% of economists polled by Reuters as of November 22 expect the BOJ to raise rates by 25 basis points at its December meeting, which would take the benchmark policy rate to 0, 5%.

On November 18, BOJ Governor Kazuo Ueda said the economy was heading toward sustained wage-driven inflation and warned against keeping borrowing costs too low, Reuters reported.

The BOJ also said in its latest opinion summary that if prices and Japan’s economy perform as it expects, the policy rate could reach 1% at the earliest in the second half of its 2025 fiscal year.

This is a developing story. Check back later for updates.