Japan’s Central Bank Faces Inflation Pressure, Analyst Predicts Interest Rate Hike

UBS Global Research Chief Japan Economist Masamichi Adachi believes that the Bank of Japan will likely raise interest rates in upcoming months due to mounting inflationary pressures. According to Adachi, Japan currently has negative real interest rates, contributing to an easy financial environment. Inflation dynamics suggest a shift in policy is necessary as long-term inflation expectations are projected to steadily rise towards 2.0%. He also anticipates government fiscal expansion which could fuel further inflationary pressure. While the Bank of Japan’s next rate hike may be in January, a December move is still considered possible.