The government is preparing fresh support measures to lower prices of petroleum products, which will reduce the drag on household incomes and will prevent inflation from breaching 2% for now. We still expect inflation to surpass 2% in the second half of the year as underlying inflation accelerates and prices of electricity and gas surge. But with inflation only rising above the Bank of Japan’s 2% target for a few months, the Bank will keep policy settings loose for the foreseeable future.
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