Japan’s government is capping gasoline prices at levels below last year’s average and is also releasing crude oil from stockpiles to prevent shortages. However, should crude oil prices rise much further, the government may baulk at the resulting fiscal costs. And it’s unclear whether the government will take measures to reduce electricity and gas prices as well. Either way, the Bank of Japan is worried about the inflationary consequences of the weaker yen and we’ve brought forward our forecast for the next rate hike from June to April.
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