The Bank of Japan's next meeting will be held on 29–30 October. With the release of the Outlook Report approaching, discussions are expected on how to interpret the change in the policy phase and the pace of rate hikes. The 2 focal points will be underlying inflation trends and the assessment of financial conditions.
At its previous meeting in September, the Bank of Japan raised its policy rate to around 1.25%, and the Outlook Report is scheduled to be released at the next Monetary Policy Meeting. Attention focused on the governor's remarks at the press conference that “the policy phase had changed.” Against this backdrop, policy management is expected to take into account the neutral interest rate range.
The neutral interest rate range is estimated at approximately +1.1% to +2.5%, and some view the September rate hike as having brought the policy rate close to the lower end of the range. The focus of discussion will be whether to continue raising rates and at what pace.
The key points of discussion can be condensed into 2 perspectives: “the outlook for underlying inflation and its risks” and “the current assessment of financial conditions.” Upside risks to underlying inflation are said to be a factor affecting the terminal rate and an important factor in determining the degree of easing or tightening in financial conditions.
This article organizes the discussions that may unfold at the October meeting based on the governor's press conference and Summary of Opinions from the September meeting, remarks by policy board members in September and October, and recent economic indicators.