People familiar with the thinking say the Bank of Japan sees little reason to follow last month's increase with another immediately unless upside price risks suddenly flare. Instead, the plan is to comb through incoming data and decide whether a December rise makes sense. The call at the Oct. 30 meeting can still shift right up to the finish line, the people said.
The BOJ will publish a fresh quarterly economic outlook alongside its policy statement, and officials will factor in pricier oil and consider whether to include a pending temporary cut to the food tax in their projections. Producer price figures for September show input cost pressures have cooled a bit, reducing urgency to quash runaway prices. Even so, with producer prices at 6.8%, officials see a case for raising rates in due course.
Pausing between hikes is a decision as consequential as hiking. Market Briefs covers the BOJ free every morning.
Governor Kazuo Ueda's board raised the benchmark to 1.25% last month, citing the need to stay ahead of upside inflation risks as the BOJ pivots to a phase that puts more weight on those pressures. That September move marked two hikes in three months, the fastest cadence since 1990. The bank has not delivered increases in back-to-back months since 1980, signaling a long-standing habit of waiting to judge the effects before moving again.
Politics and policy abroad are in the backdrop. The September decision came as Treasury Secretary Scott Bessent pressed for continued normalization to bolster the yen, and he has been more outspoken since a rare joint effort by Japan's Finance Ministry and the U.S. Treasury to support the currency in late July.
Bets on an October hike hit roughly 40% late last month, then faded after clear messages from Federal Reserve officials led investors to dial back expectations for a U.S. move this month. Now, overnight swaps imply about a 10% chance of a BOJ hike in October and roughly an 88% likelihood by December. In a survey last month, about one in three economists picked December, while more than half pointed to January.
Officials say they are tracking developments in the Middle East, AI-driven demand, and currency moves to help time any further step. Oil is up about 15% since the BOJ put together its last quarterly projection in late July, adding to price pressures in a resource-importing economy. Traders will also zero in on this week's U.S. CPI print.
People familiar with the situation say growth and inflation are roughly matching the BOJ's broad view, and sources add that core price gains can finally be assessed as running near 2%, a little over ten years after the goal was set in 2013. The bank expects the trend to align with its 2% objective within the next 18 months, but officials stress the mission is to make inflation settle around that level, not just tag it briefly. Ueda underscored in parliament that stabilizing the price trend near 2% is essential.
After the latest report, the yen first dipped and then firmed, hovering near 157.08 per dollar in early Tuesday evening Tokyo trading. It remains weaker than the 155.87 mark seen hours before the BOJ's quarter-point increase on Sept. 18.
Japanese policy moves ripple through global bond markets. Get the free Market Briefs daily newsletter and follow it.
