Despite a decline in Japan's October inflation rate, economists predict a possible Bank of Japan (BOJ) interest rate increase.

• In October, Japan's headline inflation rate decreased to 2.3%, which is the lowest it has been since January, and lower than the 2.5% recorded in September.
• The core inflation rate decreased to 2.3% from 2.4%, although it was slightly higher than the 2.2% predicted by economists surveyed by Reuters.

In October, Japan's headline inflation rate decreased to 2.3%, which is the lowest it has been since January, and lower than the 2.5% recorded in September.

The core inflation rate, which does not include fresh food prices, was 2.3% in October, lower than September's 2.4%, but slightly higher than the 2.2% predicted by economists surveyed by Reuters.

The central bank of Japan has consistently stated that its objective is a "positive feedback loop between wages and prices." As a result, a low inflation rate may necessitate the bank to maintain a loose monetary policy.

As per LSEG data, 55% of economists surveyed by Reuters as of Nov. 22 anticipate the BOJ to increase rates by 25 basis points at its December meeting, resulting in a benchmark policy rate of 0.5%.

BOJ Governor Kazuo Ueda stated on Nov. 18 that the economy is moving towards sustained inflation driven by wages, and cautioned against maintaining low borrowing costs, according to Reuters.

The BOJ stated in its recent report that if the economy and prices develop as expected, the policy rate could reach 1% in the second half of the 2025 fiscal year.

This is a developing story. Check back later for updates.