Yen Weakness Influences Japan's Anticipated Interest Rate Hike

According to BlockBeats, economist Alicia Garcia Herrero suggests that the persistent weakness of the yen is a crucial factor in the Bank of Japan and the Japanese government's anticipated decision to support a long-awaited interest rate hike this month. Despite concerns over U.S. tariffs and broader geopolitical risks, Japan's economy has shown more resilience than expected. Inflation expectations in the short, medium, and long term remain above the Bank of Japan's 2% target, reinforcing the case for further policy normalization. Rising food prices have driven up the core inflation rate, and the yen's continued weakness against the dollar, hovering around 155, may exacerbate imported inflation pressures. Alicia Garcia Herrero predicts that the Bank of Japan will raise the policy rate by 25 basis points to 0.75% at its meeting on December 19. Looking ahead, if the yen fails to stabilize post-hike and continues to impact real income negatively, the Japanese government might also consider further tightening measures, potentially paving the way for another 25 basis point increase early next year.