What to Expect from the BOJ’s October Meeting and Outlook Report: Watching USD/JPY and Japanese Stocks

The Bank of Japan will hold its meeting from Thursday, 29 October to Friday, 30 October and release its Outlook for Economic Activity and Prices. The Outlook sets out the economic and price outlook and the direction of monetary policy for the next 3 years, and, together with the Governor's press conference after the meeting, will provide material for the market. The focus this time is not so much on whether the Bank of Japan will raise rates as on how much guidance it will provide on the next rate hike.

The Outlook for Economic Activity and Prices presents the economic and price outlook for approximately the next 3 years. The price outlook is based on core CPI, and median forecasts for the growth rate and inflation rate will be released. The Bank of Japan's inflation target is 2%, and its outlook is updated annually, with projections for fiscal years 2026 through 2028.

During the same period, the US FOMC will be held from 27 to 28 October, with the results announced in local time. The Federal Reserve's interest-rate decisions will affect the yen ahead of the Bank of Japan's decision, which will follow. The market expects the likelihood of rates remaining unchanged and the strength of guidance on the next rate hike to determine whether the yen weakens or strengthens.

Factors for foreign exchange and equities include the amount of past intervention, current interest-rate levels and the Nikkei Average's performance. A record approximately ¥15.4 trillion of foreign exchange intervention has already been carried out, and depending on developments, concerns about further intervention could resurface. The Nikkei Average is currently expected to be driven by both the impact of a weaker yen and expectations of higher interest rates.