Slower food inflation won’t stop BoJ from hiking rates

Soaring food inflation has been the key driver behind the recent strength in headline inflation. Processed food inflation will remain high for a while yet but that won’t prevent overall food inflation from falling sharply as the surge in rice and fresh food inflation unwinds. While that reversal could push inflation below the Bank of Japan’s 2% target, we doubt it will prevent the Bank from tightening policy further.

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