Japan December headline CPI +3.6% (expected +3.4%, prior 2.9%)

Japan inflation data for December 2024, all figures are y/y.

Headline overall inflation rate 3.6%

• Expected 3.4%, prior 2.9%
• the m/m rate is +0.6% (prior 0.4%)

Core Inflation Rate 3.0%

• Expected 3%, prior 2.7%

Inflation Ex-Food and Energy 2.4%

• prior 2.4%

If anyone at the Bank of Japan was waiting to see this data before hiking rates (which I doubt) this clears the deck. The BoJ is expected to take its short-term rate to 0.5% at today’s decision.

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The past six months have shown a drift higher for Japanese inflation overall, with a more noticeable jump in November:

• July 2024: The core CPI, which excludes fresh food prices, increased by 2.7% y/y, up from 2.6% in June.

• August 2024: The core CPI rose by 2.8% y/y, matching market expectations and marking the fourth consecutive month of acceleration.

• September 2024: The core CPI growth slowed to 2.4% y/y, primarily due to the implementation of energy subsidies.

• October 2024: The core CPI, which excludes fresh food prices, increased by 2.3% year-on-year (y/y). This marked a slight deceleration from the previous month’s growth rate. The slowdown was primarily attributed to the base effect of the prior year’s government decision to halve subsidies aimed at curbing fuel costs.

• November 2024: The core CPI rose by 2.7% y/y, indicating an acceleration in inflation. This uptick was largely due to the government’s reduction of electricity and gas subsidies, which led to higher energy prices.

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Still to come from Japan is the expected rate hike from the BoJ:

• Poll shows 18 out of 19 economists expect a Bank of Japan rate hike on Friday
• The BOJ meet today and tomorrow and is unlikely to delay rate hike action

As always, there is no firm time for the BoJ statement. Experience suggests to expect it some time in the 0230 to 0330 GMT time window. A rate hike is widely expected today. When there is some sort of change of policy expected the announcement is more likely to come later in that time window than earlier

This article was written by Eamonn Sheridan at www.forexlive.com.