The BOJ policy meeting will be held on 29-30 October. While the policy rate is expected to remain unchanged, the market sees the underlying inflation rate as having nearly reached 2%, making the outlook a focus of attention.
The BOJ's monetary policy meeting is expected to be held from 29 to 30 October, and the policy rate is expected to remain unchanged. At the same time, the BOJ is widely expected to indicate that the underlying inflation rate has nearly reached 2%. The BOJ has so far viewed the virtuous cycle between wages and prices as strengthening and assumed that the underlying inflation rate would rise toward 2%.
The market puts the probability of a rate hike by December at 69.8%, and expectations for an early additional hike are reportedly rising, with the market pricing in more than one hike by January 2027. This could lead to broader expectations that the BOJ is gaining confidence in achieving its price target.
However, the writer expects that although the assessment may be that the target has been “almost achieved,” the message is unlikely to take on the bullish nuance of saying it has been “fully achieved.” Compared with market expectations, the message could be dovish, taking downside risks to prices into account.
The BOJ is said to have an incentive to declare “victory” in its efforts to overcome deflation since the introduction of unprecedented monetary easing, while remaining alert to the risk of prices falling again. However, it is not expected to go as far as declaring complete victory.