While the view that the BOJ is highly likely to defer an October rate hike is gaining ground, the outlook remains uncertain as pressure from the United States for a rate hike intensifies.
Ahead of the BOJ's monetary policy meeting scheduled for the 29th and 30th of this month, the central bank is widely expected to defer an October rate hike. Meanwhile, intensifying pressure from the United States for a rate hike is affecting market expectations. Bloomberg reported that the BOJ is highly likely to defer a rate hike at this month's meeting, while the possibility of a December hike has not been ruled out.
A BOJ policy board member from the faction favoring modest rate hikes said that the bank would not be "excessively cautious about raising rates," rekindling debate over an October rate hike against the backdrop of inflation concerns in the United States. Depending on developments in the United States, the direction of the US-Japan interest-rate differential has once again become a focus of the market.
The Nikkei 225 fell sharply on the 15th, closing at ¥64,425.95, down approximately ¥3,318 from the previous day, prompting concern over the impact on the market of a cycle of consecutive rate hikes. The stock market's reaction is expected to depend on developments in US monetary policy.
As the Federal Reserve's meeting at the end of this month falls one week before the midterm elections, the decision on whether to implement a rate hike is expected to be assessed carefully. Whether the BOJ will move to raise rates by year-end is also seen as depending on developments in the United States.