While financial markets view the Bank of Japan's terminal policy rate as around exactly 2%, concerns about a slowdown in AI-related investment triggered by the U.S. midterm elections are clouding the outlook for rate hikes.
The Bank of Japan's terminal rate priced in by the market is reportedly around 2%, and concerns about a slowdown in AI-related investment are creating uncertainty over the outlook for the Bank of Japan's rate hikes. The results of the U.S. midterm elections have been cited as a contributing factor. Deteriorating conditions for AI-related investment are attracting market attention as a potential influence on inflation trends. The outlook could change depending on future data.
At the same time, some observers say concerns about upside inflation risks originating from AI are receding. Although the view that the rate-hike policy will be maintained remains firmly entrenched, new supply-and-demand risks related to AI may be affecting the market's assumptions. In the short term, the market is expected to continue monitoring both the direction of the Bank of Japan's interest-rate policy and developments in the AI market.