USD/JPY fell after rising to the ¥158 range in the New York market on the 29th. The Bank of Japan’s Outlook Report and Governor Ueda’s press conference will be the focus. While the Bank is expected to leave rates unchanged at its next meeting, attention is turning to a possible upward revision to its inflation outlook and the pace of future rate hikes.
In the New York market the previous day, USD/JPY rose against a backdrop of a decline in EUR/USD, then fell again as US long-term yields declined, while EUR/JPY rose. Against this backdrop, USD/JPY in the Tokyo market is likely to remain focused on the Bank of Japan’s policy decision.
At today’s Bank of Japan Monetary Policy Meeting, the current target for the uncollateralised overnight call rate, around 1.25%, is expected to be left unchanged. The key points will be the inflation outlook and the Outlook Report, with an upward revision to next fiscal year’s forecast expected to be under consideration.
Market expectations suggest that the Bank of Japan is likely to judge that its 2% price-stability target has been reached, and that the Outlook Report will probably include a modest upward revision to the inflation forecast, mainly for fiscal 2027. This is expected to increase expectations of a rate hike at the December meeting.
In addition, further rate hikes are expected to continue, with 0.25% hikes in December, March next year and June, putting the terminal rate at approximately 2.00%. The one-year rate two years forward may price in a level of around 2.25%.