The possibility that the Bank of Japan will move to raise rates as early as October has been raised, with views suggesting that the next hike is expected at the December meeting. Meanwhile, oil-price developments are said to influence the outlook for U.S. interest rates and affect the performance of dollar-yen and equity markets.
There is a view that the Bank of Japan could raise rates in October, while the next rate hike is expected at the December meeting. Market participants believe that rate hikes will settle into a cruising pace of once every 3–4 months. The probability of an October hike is estimated at approximately 31%, with oil prices seen as an important factor.
The dollar-yen exchange rate is again approaching ¥160, drawing attention to the relationship between expectations for a Bank of Japan rate hike and downward pressure on the yen. Comments by finance and fiscal policy officials are also cited as an influencing factor, while oil prices are viewed as playing a major role in the preconditions for monetary policy normalization.
If oil prices remain elevated, expectations for a Fed rate hike could strengthen, potentially increasing pressure on the Bank of Japan to raise rates. Conversely, if oil prices decline, expectations for a Fed rate hike could recede, easing downward pressure on the yen and giving the Bank of Japan more flexibility over the timing of its next rate hike.
Wage growth is currently limited in the labor market, and inflationary pressure is said to show few signs of secondary effects. There is also a view that a slowdown in rent increases and subdued wage growth will help stabilize underlying inflation.