Higher fuel costs are likely to drive inflation up.
Moody’s Analytics reported a forecast of Japan’s inflation rate, rising to 1% YoY in January, from 0.9% in November and December last year.
According to Moody’s, an increase in fuel costs are likely to boost inflation rate, although its outlook for domestic demand stays positive.
“The key unknown remains whether sustained and stronger income growth will emerge. We have seen green shoots; the annual spring wage negotiations will be important, and the government has already begun campaigning for firms to deliver at least a 3% increase. We don't expect the Bank of Japan to hit its 2% inflation target, although tapering long-term asset purchases remains an option by the end of the year,” Moody’s said.
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