A view has emerged that the BOJ could raise rates in October depending on conditions. A December rate hike was also described as almost certain.
Regarding the timing of the BOJ's next rate hike, Kazuo Momma (門間 一夫), a former BOJ board member, expressed the view that December is the main scenario, while consecutive rate hikes at the October meeting could be possible depending on conditions. Momma said the next rate hike was "almost certain in December," framing the timing as a choice between October and December, and said the focus of the debate was whether there was a basis for not waiting until December.
Against a backdrop of changes in the external environment, there was also a view that the possibility of an October hike was around 20% to 30% even under the basic policy of raising rates approximately once every three months, depending on external factors. At the same time, it was recognized that, given price trends, the possibility of delaying a rate hike until January next year or later was low even if the BOJ's basic stance changed.
The market views price trends and US developments as important indicators of the BOJ's future interest-rate outlook, and estimates the probability of an October hike at just over 30% and the probability of a hike by December at just under 90%. The BOJ has cited the situation in the Middle East, AI demand and exchange-rate movements as factors in its rate-hike decisions, and Momma said these currently favor a rate hike.
At its September meeting, the BOJ raised its policy rate to 1.25%, its fastest pace under Governor Ueda. Momma expects a terminal rate of 1.75%–2.0% and, while anticipating a hike of around 0.25 percentage points within the year after the next rate increase, said there was potential for an upward surprise depending on factors such as wage increases.