Tokyo’s inflation rate exceeded expectations in November and, coupled with other economic indicators aligning with the Bank of Japan’s (BOJ) forecasts, has fueled speculation about an impending interest rate hike in December, boosting the Yen.
The Ministry of Internal Affairs revealed on Friday that Tokyo’s consumer prices, excluding fresh food, hiked 2.2% year-on-year in November, up from 1.8% due to the tapering of energy subsidies. Overall inflation rose to 2.6%, also bettering economist predictions due to increasing food prices.
The Japanese yen saw a boost post the report, moving from 151.34 to a high of 150.01 against the dollar, given the possibility of a BOJ rate increase in December. Overnight swaps currently indicate a 63% probability of such an action by the central bank at its next meeting.
Meanwhile, BOJ Governor Kazuo Ueda’s recurrent signals that interest rates would be raised should the economy perform as expected by the central bank have doubled market anticipations for this move in the current month.
In addition, further economic data released on Friday showed a steady job market with a slight uptick in the job to applicants ratio to 1.25 in October, while the unemployment rate also marginally rose to 2.5%.
The data does not hinder the BOJ’s consideration of a rate hike, commented Taro Saito, Head of Economic Research at NLI Research Institute, suggesting a possible move in December provided financial markets remain stable.
