UBS has revised its inflation forecast for Japan and expects inflation to be higher in coming years due to a robust US dollar and higher energy prices.
The UBS FX team has adjusted its exchange rate outlook and now expects the exchange rate to reach 150 by the end of 2025, up from the previous estimate of 145. This adjustment is based on the backdrop of a strong US dollar.
The revised forecast expects inflation to rise by 0.1-0.2 percentage points between 2025 and 2026, driven by higher energy costs and consumer price index (CPI) goods. The core core CPI, which excludes volatile fresh food and energy prices, is expected to remain above 2% through 2025.
UBS now expects interest rates to reach 2.0% annually by the end of 2025, up slightly from the previous estimate of 1.9%. UBS also highlighted that food inflation, currently at 4.2% annualized, is expected to remain at similar levels for at least the first half of this year. This is attributed to the depreciation of the yen and unstable supply conditions.
The research firm notes that while services inflation has been relatively low at 1.5%, mainly due to weak residential rents and public service prices, an acceleration in overall services inflation is expected.
However, the development of inflation in specific service components, such as housing rent and public services, which account for 37% and 25% respectively of the weight of services within the inflation calculation, remains uncertain. YOU
This article was produced with the support of AI and reviewed by an editor. For more information see our General Terms and Conditions.
