The BoJ is prioritising the containment of inflation, and expectations are growing that future rate hikes will be concentrated in December. Market attention is focused on the outcome of the policy meeting at the end of October and the economic outlook going forward.
The BoJ governor indicated that core inflation should remain near the 2% target and stressed the policy of prioritising inflation containment. At the same time, views suggest that the focus of policy management is shifting toward containing price risks, and, together with the fact that the policy rate was raised to the high level of 1.25% at the September meeting, this also points to the possibility of further tightening.
Market attention is focused on the monetary policy meeting on 29–30 October, where the latest economic growth rate and inflation outlook are scheduled to be released. Many financial institutions expect another rate hike of approximately 25 basis points in December.
Statements from US Treasury officials have also been cited as a factor affecting the relationship between exchange rates and monetary policy. Erin Brown said that Japan had emerged from a deflationary environment and that exchange rate movements should reflect reality. The yen fell temporarily, but pressure remains.
Under the current circumstances, the BoJ is expected to balance the risk of inflation exceeding 2% against the need to avoid excessive tightening, with new economic forecasts and policy guidance expected to be reviewed at the meeting at the end of October. Investors are watching the timing and pace of future rate hikes closely.