The Bank of Japan is widely expected to leave its policy rate unchanged at its 30 October monetary policy meeting, avoiding rate hikes in 2 consecutive months. The possibility of another rate hike in December remains, however, and the interest-rate market has raised the probability of action by December.
The Bank of Japan is reportedly leaning toward leaving its policy rate unchanged at its 30 October monetary policy meeting, and is expected to avoid rate hikes in 2 consecutive months. The possibility of another rate hike by December remains.
In the foreign-exchange market, dollar/yen briefly rose into the ¥158 range immediately after the announcement, as the yen's weakness continued. Overnight index swap data show that the probability of a rate hike this month has risen to approximately 10%, while the probability of action by December has increased to approximately 88%.
Governor Ueda said that underlying inflation was approaching the 2% target, while pointing out that it was important for prices to stabilize at this level. The BOJ indicated that it would assess the impact of high oil prices and a temporary cut in the consumption tax on food.
The focus ahead will be how the BOJ positions its policy decision at the October meeting and the timing of a policy shift, including a rate hike in December. The market's focus is shifting from an October hold to developments in December.