Japan's Economic Resilience Supports Further Rate Hikes, Economist Says

Japan's economy shows sufficient resilience to support further interest rate hikes, according to Abhijit Surya, Senior Economist for Asia-Pacific at Capital Economics. According to Jin10, Surya noted that despite the global energy crisis potentially slowing economic momentum, signs indicate that the slowdown may not be severe. As of mid-May, Japan's fuel consumption reserves can cover 206 days, with a significant slowdown in inventory depletion, suggesting progress by refiners in securing non-Middle Eastern supplies. Meanwhile, price pressures are broadening, with preliminary PMI data indicating that core goods inflation could approach 8% by the end of 2026. Capital Economics now forecasts that the Bank of Japan will tighten policy more aggressively, raising the policy rate to a terminal level of 2% by the end of 2027, with hikes approximately every four months.