The main opinions released by the Bank of Japan offered few clues about an additional rate hike in October, and the yen fell against the dollar. The Tankan survey was also viewed as failing to provide a decisive basis for an October rate hike.
The main opinions from the Bank of Japan’s Monetary Policy Meeting, released by the BOJ, offered no clues about an additional rate hike in October, prompting stronger selling of the yen and buying of the dollar in the foreign exchange market. As a result, the yen temporarily fell to ¥158.22, the largest decline among the 10 major currencies.
The market is pricing in a probability of approximately 20% for an October rate hike, while the view that a rate hike by December is already priced in has become widespread. In the bond market, interest rates rose, particularly on super-long-term bonds.
The impact of the high-level policy rate hike decided at the BOJ’s September meeting is considered limited, and the situation called for clearer guidance on the pace of future rate hikes.
The BOJ’s Tankan, or the Short-Term Economic Survey of Enterprises, showed that sentiment among large manufacturers improved to its highest level in approximately 8.5 years, while the inflation rate 5 years ahead declined to 2.5% from the previous survey. Experts said this reduced the possibility of consecutive rate hikes in October.
The U.S. Federal Reserve Board (FRB) unanimously decided on an additional rate hike and indicated support for one more rate hike this year.
Some believe that expanding AI-related demand is pushing up sentiment among manufacturers, while others have pointed out that there are still no signs of mounting inflationary pressure.