Analyst: Inflationary pressures persist in Japan, with focus on further rate hike signals

According to Golden Ten Data on June 16, Daiwa Research Institute economist Kanako Nakamura stated that the Bank of Japan listed accelerated cost pass-through as one of the reasons for raising interest rates in its statement, emphasizing that the recent rise in import costs influenced by the Middle East situation, together with the existing wage-price cycle, is jointly driving up prices. Even if oil prices stabilize as peace negotiations progress, the cost increases have already spread from plastics and ethylene sectors to electricity, natural gas, and transportation, indicating that price pressures will persist. Against this backdrop, the market is focused on how hawkish the Bank of Japan will be in signaling further rate hikes. Given that the interest rate differential between Japan and the US continues to put depreciation pressure on the yen, it remains necessary to continue raising interest rates to prevent a further weakening of the yen.