The Bank of Japan is expected to raise its policy rate to 1.25%, its highest level in 31 years, at its monetary policy meeting on 17 and 18 September. The statement and the governor’s press conference after the meeting will be closely watched for indications of the pace and scope of future rate hikes.
The Bank of Japan is scheduled to hold its monetary policy meeting on 17 and 18 September and is expected to raise its policy rate to 1.25%. This would be the fifth rate hike under the current leadership, and analysts have pointed to the possibility that it could be the fastest pace of increases in the BOJ’s history, surpassing previous hikes including the lifting of negative interest rates.
According to people familiar with the matter, the prevailing view is that accommodative financial conditions will not change significantly, as the BOJ seeks to avoid upside risks stemming from higher crude oil prices and yen depreciation while the underlying trend in prices approaches 2%. Specific references to the timing and pace of the next rate hike and the terminal rate in the statement and the governor’s press conference after the meeting are expected to be limited.
Movements by the Federal Open Market Committee (FOMC) and the European Central Bank (ECB) will affect the yen, while monetary policy developments in Japan, the US and Europe are a key market focus amid global inflationary pressure. The yen at times fell to the low ¥156 range against the dollar, and uncertainty remains over the pace of future rate hikes.
Although the BOJ is highly likely to maintain its rate-hike stance at this meeting, readers are increasingly focused on looking for clues in the wording of the statement and the governor’s remarks about the response at the next meeting and changes in accommodative conditions.