The Bank of Japan may send an important policy signal this month by indicating that Japan’s underlying inflation has broadly reached its 2% price stability target, according to a Reuters report citing three sources familiar with the central bank’s thinking. If that assessment is formally included in the BOJ’s latest economic and price outlook, it would mark another shift in how policymakers view the durability of inflation and could help justify additional rate hikes in the coming months. The report said a recent run of data released by the BOJ has strengthened confidence among decision-makers that underlying inflation, which strips out one-off factors and reflects broader demand and wage trends, is now roughly at 2%. Markets currently see December as a key window for the next rate increase. A formal confirmation from the BOJ that underlying inflation is around that level would likely reinforce expectations that Japan is moving into a sustained phase of policy normalization.
The Bank of Japan may deliver an important policy signal this month by indicating that Japan’s underlying inflation has broadly reached its 2% price stability target, according to Reuters, which cited three sources familiar with the central bank’s thinking.
If that view is formally written into the BOJ’s latest economic and price outlook, it would point to a further shift in the bank’s assessment of how durable inflation has become. It would also provide support for additional rate hikes in the coming months.
Reuters said a series of recently released BOJ data has strengthened confidence among policymakers. Their view is that underlying inflation, which excludes one-off factors and reflects broader demand and wage changes, is now roughly at 2%.
Markets currently see December as an important window for the next rate increase. If the BOJ confirms that underlying inflation is around 2%, expectations for Japan to enter a sustained phase of policy normalization would strengthen.
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