The Bank of Japan is set to keep its policy rate at 1.25% on Friday while stressing its focus on keeping underlying inflation from overshooting its 2% target. That guidance suggests scope for a hike as soon as December, according to Reuters.
The Bank of Japan is set to hold rates steady on Friday, but it is expected to signal that a December increase is possible. The message would stress the bank's focus on preventing underlying inflation from overshooting its 2% target.
BOJ skips a back-to-back hike
At the two-day meeting ending Friday, the BOJ is set to maintain its policy rate at 1.25%. It would forgo a consecutive hike to spend more time scrutinising how past rate increases affect lending conditions.
The bank is also likely to slightly revise up next fiscal year's price forecast in its quarterly report, people familiar with the matter told Reuters. They said it would signal that underlying inflation has roughly achieved its 2% target.
A faster hiking pace
Analysts said such guidance would reinforce the BOJ's message last month that it has entered a new, more hawkish policy phase and is open to raising rates once every few months. The BOJ raised rates in September after a hike in June, a shorter interval than the roughly twice-a-year hikes in 2024 and 2025.
Kazuo Momma, a former BOJ executive now at Mizuho Research Institute, predicted rate hikes in December and March next year. He said the BOJ is essentially telling markets it will hike once a quarter.
Inflation pressure builds
Core consumer inflation exceeded the BOJ's 2% target in September for the first time in nine months. High fuel costs from the prolonged Middle East conflict blunted the impact of government fuel subsidies, and a weak yen raised import prices.
Most analysts polled by Reuters expect the BOJ to raise its policy rate to 1.5% in December, followed by further hikes next year. Their terminal rate projection centres around 1.75% to 2%. Markets will watch Governor Kazuo Ueda's post-meeting news conference for hints on the pace and timing of the next move.
Source: Investing.com (Reuters)
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