Steady at 3%! Japanese inflation provides reasons for highest interest rates in 30 years.

The core inflation index in Japan has remained stable at 3% for the second consecutive month, signaling persistent price pressures just hours before the Bank of Japan is set to convene for its interest rate decision meeting. Market expectations are high for the Bank of Japan to raise interest rates for the first time since January. According to data released by the Japanese Ministry of Internal Affairs and Communications on Friday, the core Consumer Price Index (CPI) excluding fresh food rose by 3% year-on-year in November, matching the previous month and economists' median estimates. The overall inflation rate also met analysts' expectations, recording 2.9%; while the inflation index excluding energy prices saw a slight decrease from the previous month to 3% year-on-year. With the release of this inflation data, there are only a few hours left before the Bank of Japan's interest rate decision is announced. A survey of 50 economists all predict that the Bank of Japan will raise the benchmark interest rate to 0.75%, the highest level in 30 years. Against the backdrop of the central bank continuously moving towards a neutral monetary policy stance, this inflation data may further focus investors on the pace of interest rate hikes in the coming year. It is worth noting that the core inflation index in Japan has exceeded the Bank's 2% inflation target for 44 consecutive months. The recent overall inflation is supported by the rebound in energy prices - as the government reduces public utility subsidies, energy-related consumer costs have seen a noticeable increase. Rising prices have become a major governance challenge for Prime Minister Saionji Takamori of Japan. Prior to her becoming Prime Minister, her ruling party, the Liberal Democratic Party, has suffered setbacks in two national elections due to increasing public dissatisfaction with high living costs. To alleviate the pressure on people's livelihoods, the Saionji Takamori administration has introduced a series of measures to relieve prices, including winter electricity subsidies and one-time cash subsidies for children, all of which are included in the government's economic stimulus package. A report released by the Imperial Data Bank of Japan last month showed that the number of price increase projects by major food companies in Japan this year will reach 20,609, a significant increase of 64.6% from the previous year. Economist Taro Kimura said, "Maintaining the core inflation rate at around 3%, significantly higher than the Bank of Japan's 2% policy target, will strengthen the Bank's judgment that the current price increase has enough sustainability to support raising the policy rate from 0.5% to 0.75%. The rate hike is likely to be implemented later today." Market participants are closely monitoring the speech by Bank of Japan Governor Ueda Kazuo scheduled for later on Friday. The press conference following the policy decision is expected to be held at 14:30 Beijing time. Any indication of the central bank's concerns about sticky inflation could reveal its pace of further rate hikes next year. At the same time, Ueda Kazuo may provide reassurance to the public that price increases will gradually slow down. The Bank of Japan's latest economic outlook report released in October predicts that as food inflation pressure eases, the core inflation index will fall below 2% in the first half of the new fiscal year starting in April next year. From the perspective of businesses, data from the Imperial Data Bank shows that Japanese food and beverage companies plan to increase prices on 1,050 products next year; compared to around 4,400 products planned for price increases by 2025 in the same period last year, the scale of price increases has significantly narrowed.