With the BOJ having effectively acknowledged its 2% inflation target, the possibility of a December rate hike is being discussed, and its effects are beginning to emerge in mortgage rates, deposit rates and share prices. Japan Post Bank's rate increase and the megabanks' deposit-rate hikes are also proceeding at the same time.
At the BOJ meeting at the end of October, the policy rate was kept at around 1.25%, while the bank indicated that underlying inflation had reached a level consistent with its 2% stability target. This has been interpreted as the BOJ moving towards exploring a path of longer-term rate increases.
Market reaction emerged in November, with the Nikkei Stock Average recording a 3,643-point decline on 6 November, the third-largest drop on record. AI-related shares were sold against the backdrop of the US midterm elections, and the probability of a December rate hike temporarily fell to the low 50% range.
The direct policy effects were summarised in 3 points following the October decision. While keeping the policy rate unchanged, the BOJ strengthened its assessment that underlying inflation was consistent with its target. As the interest-rate environment moves into a world with interest rates before year-end, the focus will be on what changes may occur in household mortgages, deposits and share prices.