Japan Economics
BoJ won’t budge despite soaring inflation
While imported inflation will lift underlying inflation close to 3% by early next year, government subsidies to electricity prices will push headline inflation below 2% by Q2 2023. Indeed, the Bank of Japan remains convinced that the recent strength in inflation won’t be sustained as wage growth has yet to rise in earnest. And with the global downturn dragging Japan’s economy into recession, the window for policy tightening is closing rapidly. The Bank won’t lift its short-term policy rate nor will it ditch its 10-year yield target as the resulting drag on activity would outweigh any perceived benefits from a weaker yen.
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