The Bank of Japan plans to maintain its benchmark interest rate at 1.25 percent on Friday while laying the groundwork for a December increase. Officials expect to slightly raise price projections in their upcoming quarterly report, citing solid wage growth and durable inflation expectations. This trajectory parallels impending rate hikes in the United States and Europe prompted by an artificial intelligence investment boom and Middle East energy shocks. Investors are focusing on Governor Kazuo Ueda's post-meeting remarks to gauge the pace of future monetary adjustments.
Key points
Policymakers intend to raise interest rates toward neutral levels to stop underlying infl…: Policymakers intend to raise interest rates toward neutral levels to stop underlying inflation from exceeding its target.
Central banks across the United States and Europe are similarly preparing for near-term r…: Central banks across the United States and Europe are similarly preparing for near-term rate hikes driven by energy shocks and an artificial intelligence boom.
Market participants will scrutinize Governor Kazuo Ueda's upcoming press conference for p…: Market participants will scrutinize Governor Kazuo Ueda's upcoming press conference for precise signals regarding the timing of future policy adjustments.
Sources checked by our analysis pipeline: 1
TOKYO, Oct 30 : The Bank of Japan is set to keep interest rates steady on Friday but stress its focus on preventing underlying inflation from overshooting its 2 per cent target, suggesting scope to hike borrowing costs as soon as December.
Such guidance would reinforce the central bank's message last month that it has entered a new, more hawkish policy phase and is open to raising rates once every few months, analysts said.
The pivot would also align the BOJ with its US and European counterparts eyeing near-term rate hikes to battle inflationary risks from the AI boom and the Iran war-induced energy shock.
"Global price pressures from AI investment are quite strong, which means the recent inflation is partly demand driven," said Kazuo Momma, a former BOJ executive who is currently executive economist at Mizuho Research Institute.
"By declaring that its policy phase has changed, the BOJ is essentially telling markets it will hike rates once a quarter," he said, predicting rate hikes in December and March next year.
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