BOJ Shifts to Aggressive Inflation Fighting Posture by December, Predicts Expert

Tsutomu Watanabe, an emeritus economics professor at the University of Tokyo and price trend expert, predicts that Japan's Bank of Japan (BOJ) will shift to a more aggressive inflation-fighting posture as soon as December.

The BOJ may accelerate its rate hikes in response to rising underlying inflation, which is now close to 2%, driven by a tight labor market and increasing price pressures.

Watanabe attributes the third wave of inflation to the Middle East conflict, following waves triggered by the Ukraine war and domestic wage hikes. He estimates that consumer inflation excluding fresh food and fuel will peak near 3% in March next year before slowing towards the BOJ's 2% target.

However, Watanabe warns that underlying inflation could overshoot to 2.2% if the BOJ maintains its current slow pace of rate hikes, which would be 'pretty problematic' and force a more aggressive approach.