数据公布后，日元兑美元涨幅扩大，截至发稿，日元兑美元涨超1%报149.96。Tokyo's CPI (excluding fresh food) in November rose by 2.2% year-on-year, higher than the expected 2%, mainly due to the gradual reduction of energy subsidies. This exacerbates inflation in Japan, coupled with other data showing that the economic performance broadly aligns with the Bank of Japan's predictions, leading to a significantly increased market expectation of a rate hike. The probability of the Bank of Japan raising interest rates at the next meeting is 63%.
The continuously rising inflation in Japan has added fuel to expectations of a rate hike in December.
On November 29, the Japanese government released data indicating:
- In Tokyo, the year-on-year CPI in November increased by 2.6%, higher than the expected 2.2%;
- In Tokyo, the year-on-year CPI in November (excluding fresh food) rose by 2.2%, higher than the expected 2%, mainly due to the gradual reduction of energy subsidies;
- In Tokyo, the year-on-year CPI in November (excluding fresh food and energy) rose by 1.9%, in line with expectations.
Following the release of the data, the yen strengthened against the dollar, with the yen against the dollar rising by over 1% to 149.96 as of the press time.
Today, the Japanese government also released a report showing that Japan's labor market remains relatively tight, with the employment-to-job ratio rising to 1.25 in October, and the unemployment rate slightly increasing to 2.5%. In addition, Japan's industrial production increased by 3% month-on-month in October, while retail sales grew by 0.1%. Factory output is expected to decline by 2.2% in November and by 0.5% in December.
Market expectations for a rate hike in December have significantly increased.
Previously, the Governor of the Bank of Japan, Haruhiko Kuroda, has repeatedly stated that if the economic performance meets the central bank's expectations, they will raise interest rates. With the recent acceleration of inflation in Japan and other data indicating that the economic performance broadly aligns with the Bank of Japan's predictions, market expectations for a rate hike have risen significantly.
Overnight indexed swap markets indicate a 63% probability that the Bank of Japan will raise rates at the next meeting.
According to a Bloomberg survey, over 80% of economists expect the Bank of Japan to hike rates again before January. Taro Saito, Chief Economist at NLI Research Institute, stated:
"Overall, today's economic data has not deterred the Bank of Japan from considering a rate hike, and if financial markets remain stable, they may take action in December."
Underlying inflation remains strong.
There are signs indicating that underlying inflation in Japan remained robust in November. According to data from the Imperial Database, food companies plan to raise prices of 3,933 products by 2025, which is 2.5 times the figure planned for this year. Bloomberg economists note:
The accelerated inflation in Tokyo in November exceeded expectations, signaling a continuous increase in consumer price pressure. The rise in core CPI reflects the increase in utility prices after the reduction of energy subsidies.
On November 22, the Japanese government led by Shigeru Ishiba approved an economic stimulus package of 39 trillion yen (approximately $250 billion), to help Japanese households cope with rising prices and provide some relief from inflation. This plan includes providing cash subsidies to low-income families, restoring energy subsidies, and supporting the semiconductor and artificial intelligence industries.
According to media reports, the additional budget for this plan is expected to be approved by the cabinet today. Saito stated:
"The Japanese economy may continue to experience gradual recovery... However, the uncertainty in the global economy remains high."
