Rate increases will persist even when the Bank of Japan fires in September.
What’s happened?
The Bank of Japan (BOJ, the central bank) decided to keep its policy rate unchanged at 0.25% at its policy board meeting on September 20th, pausing after a 15-basis-point increase in July. On the same day, official data showed that headline consumer price inflation accelerated to a 10-month high of 3% in August, from 2.8% in July, following strong growth in prices for food and utilities.
Why does it matter?
The BOJ is determined to pursue monetary normalisation by raising interest rates and winding down its asset-purchase programmes. However, the pace of the policy shift and the terminal policy rate will depend on Japan’s economic fundamentals, notably the strength of private demand and inflation expectations. The pause in September was factored into EIU’s foreca...