Japanese inflation surged to 2.7% in November 2024, driven primarily by rising energy costs, marking an increase from 2.3% in October. This rise has pushed the core Consumer Price Index (CPI) above the Bank of Japan's 2% inflation target, a threshold it has exceeded since April 2022. Analysts had anticipated a core CPI of 2.6%, while the 'core core CPI' was reported at 2.4% [00754033].
The Bank of Japan has opted to maintain its borrowing costs, citing ongoing uncertainty regarding the U.S. economy, particularly in light of the recent election of President-elect Donald Trump. As a result, the yen has weakened, falling to 157.61 against the dollar, reflecting the currency's sensitivity to inflationary pressures and external economic conditions [00754033].
Despite the challenges posed by weak domestic demand, the Bank of Japan's recent communications have taken on a hawkish tone. Moody's analyst Stefan Angrick has indicated that the central bank is likely to implement two rate hikes in 2025 as it navigates the implications of rising energy prices and other inflationary factors [00754033].
The inflationary trend has raised concerns among consumers, particularly as prices for essential goods such as cabbage, potatoes, and tomatoes have increased, eroding purchasing power. This situation has been exacerbated by a decline in real earnings since early 2022, leading to heightened scrutiny of the Bank of Japan's monetary policy [00754033].
As Japan continues to face these economic hurdles, the interplay between rising inflation and the Bank of Japan's policy decisions will be critical for the nation's economic stability and the welfare of its citizens [00754033].