What's Happening?
Japan's consumer inflation rate has remained above the central bank's 2% target for the 44th consecutive month, with November's rate at 2.9%. Core inflation, excluding fresh food prices, held steady at 3%.
The Bank of Japan is expected to raise interest rates to their highest level since 1995, as it concludes its policy meeting. The persistent inflation is driven by factors such as rice price increases, although 'core-core' inflation, excluding food and energy, has slightly decreased.
Why It's Important?
The sustained inflation above target levels strengthens the case for the Bank of Japan to raise interest rates, a move that could help control inflation but also risks slowing economic growth. Japan's economic challenges include a shrinking GDP and the need for fiscal spending to boost growth. The central bank's decision will have significant implications for Japan's economic policy and could influence global financial markets, particularly if it affects the yen's value and bond yields.
What's Next?
The Bank of Japan's rate hike decision will be closely monitored, as it balances the need to control inflation with supporting economic growth. The central bank's future actions will depend on economic data, including inflation trends and GDP performance. The potential impact on the yen and bond yields will also be key considerations. The government's fiscal policy and spending strategies will play a crucial role in shaping Japan's economic outlook.
