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Public support will push inflation below 2% again

The Tokyo CPI’s strength in October has prompted us to lift our forecast for the peak in underlying inflation from 2.5% to 3.0%. However, government support measures announced today mean that headline inflation will soon fall sharply. Those measures include rebates for electricity and gas bills for households, which we estimate will knock almost 1%-pt off inflation, leaving it below the BoJ’s 2% target from March 2023.

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