Results of the October BOJ Meeting and USD/JPY and Nikkei 225

Following the results of the BOJ's Monetary Policy Meeting announced on 30 October, the policy rate was left at 1.25%, decided by a majority of 8 votes in favour to 1 against. At the same time, it was unanimously decided to raise the pace of ETF sales to around ¥860 billion annually on a book-value basis.

The equivalent pace of ETF sales on a market-value basis is around ¥2.46 trillion annually, while the pace of J-REIT sales will remain at around ¥5 billion annually. In light of the expansion in total trading value across the market, the sales ratio will be raised from around 0.05% to 0.1%, and the pace of sales will be implemented accordingly.

In the policy outlook in the Outlook Report, the core CPI forecast was raised to +2.6% for fiscal 2027, while core-core CPI was revised upward to +2.7% for fiscal 2027 and +2.3% for fiscal 2028. The assumed crude oil price was raised from around $80 in July to $105, before being expected to fall to around $70 toward the end of the period. The BOJ maintained its assessment that underlying inflation was “consistent with 2%” and indicated a policy of remaining alert to upside risks.

Changes to the statement included the addition of a review of the pace of ETF sales, and the 8-1 vote split was disclosed. Board Member Takata opposed the decision after proposing a rate hike to around 1.5%, which could have some impact on expectations for a rate hike at the December meeting.

In terms of the market reaction, movements in USD/JPY and the Nikkei 225 immediately after the announcement were reported. The USD/JPY was dominated by increased expectations of additional rate cuts and yen buying, while the Nikkei 225 fell at times following the increase in the pace of ETF sales.