Fitch: Inflation is deeply rooted, expects the Bank of Japan to raise interest rates by 75 basis points to 1.5% within the year

Deep Tide TechFlow News, April 28 — Japan has shaken off the nominal growth stagnation and deflation that have troubled its economy for more than twenty years. Fitch Ratings stated that inflation is now deeply rooted and increasingly driven by domestic factors, supporting Fitch’s view that the Bank of Japan will continue to advance monetary policy normalization. Since 2022, overall consumer price inflation has averaged 2.9%, above the Bank of Japan’s 2% target. The recent decline in overall inflation mainly reflects government energy measures rather than a weakening of underlying price pressures. Fitch expects the Bank of Japan to continue raising interest rates, with the policy rate increasing by 75 basis points to 1.5% by 2026. The real policy interest rate remains deeply negative and is expected to normalize as the Bank of Japan further tightens policy, which should, in turn, exert some upward pressure on the yen. (Jin10)