Bank of Japan acknowledges little need to raise interest rates this month, rules out future – official

The Bank of Japan continues to recognize that there is little need to rush to raise interest rates further at this month’s monetary policy meeting amid the outlook for overseas economies and financial markets. Price conditions are making steady progress towards meeting the 2% target, and the possibility of another interest rate hike cannot be ruled out. This was revealed through interviews with several parties involved.

According to people familiar with the matter, the Bank of Japan recognizes that the outlook for overseas economies, particularly the US and China, remains very uncertain, and although the financial markets have calmed down to the sudden changes in August, the situation remains unstable. .I’m looking at it. It is difficult to predict when these uncertainties will be resolved and must be reviewed at each meeting. Regarding the meetings on the 30th and 31st, decisions will be made based on trends and data in the foreign exchange market, where pressure to lower the yen is increasing again.

On the other hand, the results of this year’s spring labor union, which had a high rate of wage increases, necessary to meet the 2% price target, are showing in data, and personal consumption is also showing constant movement. In terms of prices, while the cost pressure associated with the depreciation of the yen is easing, there is a growing trend to forward wages to prices, especially in services. There is a general consensus within the Bank of Japan that the economy and prices are currently on track.

Governor Kazuo Ueda has reiterated that there is “more time” to make policy decisions, in part because the risk of upward movements in prices has decreased due to a correction the depreciation of the yen. The Bank of Japan has indicated that it will raise policy interest rates and adjust the rate of monetary easing if the economy and prices continue to move in line with the outlook, and the Bank could be judged to be on track be the basis for further rate increases. The focus is now on whether there will be a further interest rate rise in December.

According to sources, the outlook for economic conditions and prices will be discussed at this month’s meeting (Outlook report) remain unchanged from the previous forecast that consumer prices (headline CPI excluding fresh food) would remain at around 2% through the fiscal 2026 forecast period. The previous forecast is said to for fiscal 2024 and 2025, which said in July that “upside risks are higher,” will be subject to discussion regarding revisions to the terminology regarding risks due to the revised yen’s depreciation.

The BOJ has yet to reach a final decision on its outlook report or monetary policy, as there are still nearly two weeks left before this meeting, the people said.

Due to a series of political events in Japan and the US, such as the House of Representatives election on the 27th and the US presidential election on November 5, many in the market believe that any further rate hikes will take place at this month’s meeting to cancel. A Bloomberg survey of economists conducted before the Bank’s last meeting in September found that only 15% expected a rate hike this month.

On the 2nd, just after taking office, Prime Minister Shigeru Ishiba said after a meeting with Governor Ueda, “I don’t believe the environment is conducive to further raising interest rates.” that, the yen went down in foreign countries. exchange market. The next day, the 3rd, he explained that he had taken into account President Ueda’s recognition that “there is time to spare” in his comments.

(Add and update the view table for the Bank of Japan Outlook Report)