With the Bank of Japan expected to leave its policy rate at 1.25%, this report details market moves pricing in a December rate hike. It also covers September CPI trends and the results of market surveys.
The Bank of Japan is expected to leave its policy rate unchanged at 1.25% at its monetary policy meeting on 30 October. The rate hike would follow September's move, and the market is considering the possibility of an additional 0.25% hike before year-end.
According to a Bloomberg survey, 83% of economists expect a rate hike in December. While expectations for a hike at the 30 October meeting are limited, views on a rate increase before year-end are gaining strength. Core CPI stood at 2.1% in September, while CPI excluding fresh food and energy accelerated to 2.4%, suggesting that inflationary pressure may have broadened from its previous scope.
There have also been reports that the Bank of Japan is considering raising its outlook from the level projected in July, taking into account wage trends and the impact of higher crude oil prices. The focus will be on whether expectations for a December rate hike are maintained as the Bank assesses wage data and the underlying trend in prices. The dollar-yen exchange rate is sensitive to movements in the Japan-US interest rate differential and could fluctuate depending on policy announcements and indications regarding the outlook.