Kai Tuo Macro: The Central Bank of Japan is more confident in the benign economic cycle and may raise interest rates again in October

Kyodo News on July 31, Jin10 Data: Marcel Thieliant, Head of APAC Macro Strategy at Capital Economics: Japan’s Central Bank is gaining more confidence in the benign cycle between prices and wages, as it has noticed that wage hikes are not only happening in large corporations, but also spreading among enterprises of all regions, sectors and sizes. The bank believes that measures to reflect the rise in wages on sales prices are strengthening. All of this is consistent with our view that the bank will raise interest rates again at its meeting in October. However, unlike the pricing in financial markets, we do not expect another rate hike next year, as the basic inflation rate will be lower than the bank’s target of 2% due to falling import costs.