The Bank of Japan decided to leave its policy rate unchanged at 1.25%, leaving open the possibility of a rate hike in December. The BOJ also raised the pace of ETF sales to approximately ¥860 billion annually, based on book value, and scheduled its next meeting for 17-18 December.
At its October monetary policy meeting, the Bank of Japan announced that it would leave its policy rate unchanged at 1.25%. Although Committee Member Takata's proposal to raise the rate to 1.50% was rejected by a majority of opposing votes, the BOJ unanimously decided to raise the pace of ETF sales to approximately ¥860 billion annually, based on book value.
At a press conference, Governor Ueda Kazuo (植田 和嗣) said he considered the underlying inflation rate to have reached the 2% target, and indicated that the BOJ would explore further rate hikes while maintaining its framework for price stability. The next policy meeting is scheduled for 17-18 December, leaving open the possibility of an additional rate hike in December.
The Outlook for Economic Activity and Prices report revised its consumer price forecast upward to 2.6% and pointed to substantial upside risks to inflation. In the foreign exchange market, dollar-yen was showing signs of consolidating in the mid-¥156 range, with movement expected to emerge depending on upcoming US data.
The market has priced in a December rate cut by the US Federal Open Market Committee (FOMC) and an additional BOJ rate hike, although some market participants say the moves could be deferred depending on the data. With key events including the US midterm elections and employment report ahead this week, dollar-yen is expected to remain range-bound around the upper ¥156 range.