As views spread that the Bank of Japan is placing greater emphasis on asset-market trends, including stock prices and the yen, rather than interest rates alone, the possibility of a rate hike at the October meeting is resurfacing in tandem with US interest-rate developments.
Views have emerged that asset-market conditions, including stock prices and exchange rates, will have a greater influence on the Bank of Japan's monetary-policy decisions, while Governor Ueda (植田) has said that financial conditions are assessed across three dimensions: interest rates, bank lending and asset markets. This could lead to a debate in which financial conditions are viewed as accommodative if stock prices hold up, while a decline in stock prices is seen as evidence that the effects of tighter conditions are emerging.
Suehiro (末廣) of Daiwa Securities said that, although the Bank of Japan does not actually describe stock prices as a direct policy-decision indicator, a sharp decline in stock prices would make the tightening of financial conditions evident. Analysis in the United States also suggests that stock prices influence the economy and consumption as background factors, and some observers say stock prices are ultimately likely to become the focus of the economy.
Hawkish calls for a faster pace of rate hikes are growing within the Bank of Japan, and the minutes of the July meeting also showed agreement on the need to continue raising rates and adjust interest rates. However, a proposal by some policymakers to revise the price stability target was rejected, and more cautious views remain in place.
A second consecutive rate hike at the October meeting is being discussed, and Kazuo Monma (門間 一夫) forecasts a 20–30% probability. The yen fell from the ¥158 range to near ¥160 per dollar, while higher import prices are deepening the uncertainty surrounding a rate hike. Developments at the Federal Reserve and US fiscal conditions are also expected to affect Japanese monetary policy.