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BOJ Hawkish Tilt Grows as Fed Split Deepens, Keeping October Moves in Play

Investors weigh a higher probability of a BOJ hike this month against strong odds of another Fed cut.

Federal Reserve Bank of Boston President Susan Collins stands behind the Jackson Lake Lodge in Jackson Hole, where the Kansas City Fed holds its annual economic symposium, in Wyoming, U.S., August 24, 2023. REUTERS/Ann Saphir
Federal Reserve Bank of Boston President Susan Collins stands behind the Jackson Lake Lodge in Jackson Hole, where the Kansas City Fed holds its annual economic symposium, in Wyoming, U.S., August 24, 2023. REUTERS/Ann Saphir
Japanese national flag hoisted atop the Bank of Japan headquarters building is seen between traffic signals in Tokyo, Japan, January 23, 2025. REUTERS/Issei Kato/File Photo

Overview

  • The Bank of Japan’s September summary showed broader concern over price pressures, with two dissents for a 25-basis-point hike and multiple opinions backing near-term tightening.
  • Japan’s Tankan survey published Oct. 1 showed a slight improvement in big manufacturers’ sentiment and robust capex plans, keeping expectations alive for an Oct. 29–30 BOJ rate increase.
  • Governor Kazuo Ueda remains cautious as the bank waits on additional reports, including regional-branch insights, with a weaker yen and food price pass-through reinforcing hawkish arguments.
  • Fed Vice Chair Philip Jefferson backed last month’s quarter-point cut, flagged labor-market softening and unusually high policy uncertainty from tariffs and immigration, and said disinflation should resume after this year.
  • Boston Fed’s Susan Collins warned against rapid easing even as she stays open to data-driven cuts, Dallas Fed’s Lorie Logan said more labor slack may be needed to ensure 2% inflation, and market tools point to high odds of another quarter-point cut on Oct. 29.