Bank of Japan is expected to hold rates this week — SkimNews
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- Bank of Japan is expected to keep its policy rate unchanged at 1.25% after raising it last month to the highest level in 31 years, with all 16 economists in a CNBC survey predicting no change at the October meeting
- Bank of Japan is anticipated to declare it has met its 2% 'underlying inflation' target, marking a potential shift toward sustained inflation driven by wages, according to Reuters and The Japan Times
- Finance Minister Satsuki Katayama stated Japan is 'on the cusp of shifting to a period of sustained inflation driven by rising wages,' while acknowledging import costs are also pushing prices higher
- BOJ may face internal resistance to consecutive rate hikes due to fragility in the domestic bond market, according to Lombard Odier's Homin Lee, despite macroeconomic conditions supporting further tightening
- Benchmark 10-year JGB yield is forecast by nine analysts to rise to 3%–3.1% by year-end from 2.809%, and the 30-year yield to reach 4%–4.1% from 3.829%, reflecting expectations of resumed tightening after a pause
- CNBC survey respondents expect the BOJ's terminal rate to reach 1.75%–2% by mid-2027, with most anticipating the next hike in January when the bank releases its quarterly economic outlook
Why it matters: The BOJ’s signal this week could lock in a policy shift after decades of ultra-looseness, affecting trillions in global capital flows. If it confirms inflation is sustainably at 2% and sets up a January hike, yen carry trades become riskier and Japanese assets more attractive, altering portfolio allocations worldwide.
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