Japan’s core inflation likely remained well above the Bank of Japan’s (BOJ) 2% target in November, according to a Reuters poll of economists, as moderating food price increases helped offset rising energy costs ahead of a widely anticipated rate hike next week.

The nationwide core consumer price index (CPI), which includes energy but excludes fresh food, was expected to rise 3.0% year-on-year in November, matching October’s level. This comes after 2.9% growth in September and 2.7% in August, showing that inflationary pressures remain elevated but relatively stable.

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Factors Affecting Inflation

Analysts note that easing food price inflation has slightly alleviated pressure on households, while energy bills edged higher following the end of the government’s summer utility subsidies. Despite these fluctuations, core inflation has remained above the BOJ’s 2% target for over three and a half years, reflecting persistent underlying price pressures.

Economists expect this trend to influence the BOJ’s policy decisions at its December 18-19 meeting, with the median forecast suggesting an increase in the short-term interest rate from 0.5% to 0.75%.

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Timing and Market Implications

The Japanese government will release the official November CPI data at 8:30 a.m. local time on December 19 (2330 GMT, December 18), just hours before the BOJ announces its monetary policy decision.

Investors are closely monitoring the data, as it will likely impact expectations for future rate hikes, influence yen currency movements, and shape broader market sentiment toward Japan’s economic growth. Analysts emphasize that even as inflation moderates slightly due to food prices, the BOJ remains committed to controlling inflation while ensuring accommodative financial conditions.

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Outlook

With core inflation stable at 3.0%, policymakers are expected to proceed with incremental rate hikes while carefully assessing the economic impact of previous adjustments. Market participants anticipate that the BOJ will continue balancing price stability with support for growth, making this policy meeting a key event for Japanese and global investors.