Earlier in the session we had the latest Japanese inflation data, for October:
In brief:
- core consumer price growth (CPI which excludes volatile fresh food costs) picked up slightly in October, after easing the previous month
- core consumer price growth is above the BOJ's 2% target for 19 consecutive months
- the narrower measure of inflation (the core-core index that excludes fresh food and fuel costs) rose 4.0% in the year to October, staying above 4.0% for its seventh straight month)
SMBC Nikko Securities are looking for a BOJ pivot in April next year:
- "expect the central bank to end negative interest rates and remove yield control as early as in April when they see the results of labour-management wages talks and the ongoing move among companies towards passing on costs"
So far the Bank of Japan has insisted that inflation pressure is largely the result of higher global commodity prices and the weaker yen. And this is not sustainable. The BOJ wants to see sustainable price gains led by stronger domestic demand and wage growth.
The Bank of Japan has made the 10-year yield target more flexible, sending JGB yields closer towards 1%. Today's data showing inflationary pressures appearing to be more stubborn than expected is once again fuelling speculation that the BOJ may soon have to ditch its negative interest rate policy as well as yield curve control. However, the Bank of Japan says its awaiting Spring wage negotiations.
The Bank next meet on December 18 and 19.
