The Bank of Japan is considering assessing that underlying inflation has reached 2% and is highly likely to reflect this view in its October Outlook Report. Accordingly, the Bank is expected to maintain its policy of continuing to raise interest rates at short intervals.
The Bank of Japan is considering assessing that the underlying inflation rate has reached 2% and is expected to reflect this view in its October Outlook Report. Multiple sources familiar with the market disclosed this. Views are strengthening that the achievement of the price stability target is coming within reach.
After determining that underlying inflation has reached 2%, the Bank of Japan says it will maintain its policy of raising interest rates at short intervals to encourage inflation to become entrenched at that level. However, cautious views remain strong regarding consecutive rate hikes at the October meeting, following September, and the Bank is said to be taking a stance of assessing their effects.
Internally, the Bank is comprehensively assessing core indicators, medium- and long-term inflation expectations, wage trends and other factors as materials for judging underlying inflation. Some believe that the accumulation of the September meeting statement, the Bank's Tankan survey and wage data, among other factors, is tilting the Bank toward indicating in its Outlook Report that underlying inflation has reached 2%.
The focus going forward will be the market reaction if the achievement of 2% is formally indicated and the outlook for the timing of additional rate hikes based on that premise. Attention is focused on whether prices and wages will trend in line with the Bank of Japan's outlook as it organizes the factors in its quarterly Outlook Reports.