At its October policy meeting, the Bank of Japan left its policy rate unchanged while signaling the possibility of a rate hike in December. Although its Outlook for Economic Activity and Prices assessed underlying inflation as having reached around 2%, it has not yet recognized achievement of the "price stability target."
The Bank of Japan held its monetary policy meeting on 29 and 30 October and left its policy rate unchanged at 1.25%. The Outlook for Economic Activity and Prices left grounds for an increased possibility of a rate hike in December and indicated an approach of assessing the situation before making decisions from the next meeting onward.
Regarding price trends, underlying inflation was assessed as having reached around 2%, but the BOJ has not recognized achievement of the "price stability target." The conclusion was that persistence, rather than simply reaching the level, is required.
While the BOJ signaled an intention to consider adjusting the degree of easing to move toward the neutral interest-rate range, next year's policy management will depend on the data, making whether a rate hike is implemented at the next meeting in December a key focus. The author assumes that rates will rise to around 1.75% through the first half of next year.