Japan: December BoJ hike supported by trade and inflation data – DBS

Expectations of a 25bp Bank of Japan (BoJ) rate hike in December should strengthen as growth, trade and inflation trends provide support. DBS Group Research projects 0.8% growth in Japan’s real GDP in Q3, with AI-driven exports and firmer wage-led consumption underpinning the expansion. Trade figures for October are expected to indicate robust export growth alongside a widening deficit. Meanwhile, higher energy costs and a weak Japanese Yen are keeping inflation above 2%.

Why do growth and prices support BOJ tightening?

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"Real GDP is expected to expand by 0.8% qoq saar in 3Q, broadly in line with trend."

"October trade data are likely to show export growth remaining solid at 17% yoy, but the trade deficit widening to JPY1.2tn."

"Overall, these data should reinforce the case for a 25bp BOJ rate hike at the December policy meeting, with growth around trend, inflation above target, and continued pressure on external balance/exchange rate."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)