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Electricity rate hike to dilute government subsidies

Seven of Japan's ten regional utility companies have applied to the government to raise electricity prices for households. If approved, headline inflation would still drop below the Bank of Japan’s 2% target later this year but households would feel a squeeze. And if the three other firms followed suit, inflation may not drop materially below 2% until well into next year. Against that backdrop, the government will remain under pressure to help households out and will redirect some of that pressure to the Bank of Japan to play its part. We expect the Bank to abandon Yield Curve Control at its April meeting. 

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