Higher underlying inflation strengthens case for Bank of Japan’s December rise

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Higher underlying inflation strengthens case for Bank of Japan’s December rise
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Core inflation ticked up to a six-month high in October

Japanese inflation data has been a messy affair in recent months with base effects and external shocks pushing and pulling the numbers in different directions. October data is the same in that respect, but the tick up in underlying inflation will help the BoJ with the decision to raise rates in December.

The tick up to a six-month high in October while positive at first glance is still far from perfect. An acceleration of rice price inflation to a new high of over 50-years continues to exert upward pressure on the reading. While it is pushing the rate higher, it is not really supportive of the broad cost push inflation the BoJ wants to see in the numbers and satisfy confidence in the wage price cycle it wants.

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