Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments.
Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. While underlying inflation will fall further below 2% over the coming months, we still expect the Bank to hike rates once more in October. However, we expect wage growth to slow again next year as the slowdown in inflation over the past year prompts unions to demand smaller pay hikes. And with import price inflation set to turn negative as the yen strengthens, goods inflation will moderate further, too. Accordingly, the Bank won’t hike rates any further next year.
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