Japanese core CPI higher than expected, will raise interest rates in December? Be cautious of yen Arbitrage trading as hot money withdraws

Japan's core CPI rose 2.3% year-on-year in October, slightly above market expectations, justifying Japan's Central Bank rate hike next month. After today's data, the yen appreciated as much as 0.4% against the US dollar, and the market has begun to reflect interest rate hike expectations. If the rate hike materializes, the Close Position risk of the yen Arbitrage trade could resurface, or hit the global capital market. Under the banner of Trump's big dollar, Japan may be forced to accelerate interest rate hikes, where is the bottom line of Exchange Rate? (Background supplement: Virtual asset tax reform Japan's cryptocurrency profits tax is proposed to be reduced to 20%, and a number of tax reduction measures are promoted) Japan's Ministry of Internal Affairs and Communications today released consumer price index (CPI) data for October, the results showed: Core CPI (excluding only fresh food prices) increased by 2.3% year-on-year, slightly higher than market expectations of 2.2%, but down from 2.4% in September. This change is mainly due to the base-period effect of the government's fuel subsidy cuts last year. The CPI index, which excludes fresh food and energy prices, grew at an annual rate of 2.3%, up from 2.1% in September, indicating persistent demand-driven inflationary pressures. In addition, the annual increase in service prices rose to 1.5% from 1.3% in September, reflecting the possibility that companies may pass on the labor costs of RISE to consumers. The data show that inflation in Japan is still above the 2% target set by the Bank of Japan, justifying Central Bank to raise interest rates next month. Japan will raise interest rates next month? Japan's Central Bank will hold an Intrerest Rate decision-making meeting on December 18-19. According to a survey by the London Stock Exchange, as of November 22, 55% of economists predicted that Japan's Central Bank could raise interest rates by 25 basis points at the meeting, raising the Benchmark policy Intrerest Rate from 0.25% to 0.5%. Marcel Thieliant, Head of Asia Pacific at Capital Economics, also sees a high probability of a rate hike by the BOJ, saying: "The resurgence of underlying inflation, coupled with the recent rebound in consumer spending and the continued weakening of the yen, provides ample impetus for the BOJ to raise interest rates next month." In addition, according to the latest opinion summary of Japan's Central Bank, if prices and economic performance are in line with expectations, the BOJ may raise the policy Intrerest Rate to 1% as early as the second half of FY2025. However, BOJ President Kazuo Ueda did not give clear guidance on the timing of interest rate hikes, saying that the BOJ is ready to raise interest rates again as long as the Japanese economy can steadily meet its price target, driven by strong domestic demand and steadily rising wages. Many economists expect that if the BOJ does not raise interest rates at its next meeting, it may choose to raise the BenchmarkIntrerest Rate in January. Bloomberg economists further predict that the BOJ could raise interest rates by 1 yard each in January, April and July next year, forming a tighter monetary policy path. The yen Arbitrage deal fears Close Position If Japan's Central Bank decides to raise interest rates next month, it will be the second move after raising interest rates in July this year. In September, Japan's Central Bank decided to keep the Intrerest Rate unchanged, taking into account global economic uncertainty, financial market fluctuations and the strengthening of the yen exchange rate. In particular, the volatility of financial markets still lingers. Looking back at the beginning of August after the July rate hike, the global capital market was bloodied, and one of the main reasons was the close position tide of yen Arbitrage traders. The logic of the yen Arbitrage trade is to take advantage of Japan's low-interest rate environment to borrow yen funds and invest in high-yield assets. However, when Japan raised interest rates: borrowing costs increased, and the profit margins of Arbitrage trading narrowed. At the same time, interest rate hikes usually drive yen appreciation, further increasing the Exchange Rate risk of Arbitrage trading. Under this dual pressure, a large number of Arbitrage traders chose Close Position, and the withdrawal of funds caused the market to tighten Liquidity, which triggered a market crash. Now, with Japan's Central Bank likely to raise interest rates again next month, the market has begun to reflect that expectation. For example, after today's data, the yen appreciated 0.4% intraday against the US dollar. If the rate hike materializes, the yen may strengthen further, and the global capital market will have to follow closely. Related Stories Who's Crazy Selling US Debt? Japan sold $61.9 billion in Q3, the highest in history, China reduced its holdings for three consecutive months. Has the bottom arrived? With the US election storm approaching, a weak yen is the best safe-haven asset? Japan's Diet Election" The Liberal Democratic Party lost miserably, the yen hit a 3-month low, Shigeru Ishiba is afraid to become the shortest-lived prime minister? Central Bank is expected to postpone interest rate hikes 〈Japan's core CPI is higher than expected, will raise interest rates in December? Beware of Yen Arbitrage Trading Hot Money Withdrawal" This article was first published in BlockTempo "Dynamic Trend - The Most Influential Block Chain News Media".