Overview
- Sources told reporters on Monday that the Bank of Japan is considering saying in its Oct. 30 quarterly Outlook that underlying inflation has roughly hit the 2% target.
- Governor Kazuo Ueda has said the underlying rate “is more or less reaching 2%,” a view reinforced by recent Tokyo consumer price data, the quarterly tankan survey and rising wholesale prices.
- Any formal statement would be mainly symbolic but would signal the BOJ’s readiness to raise interest rates again and has pushed markets to price a strong chance of a December hike.
- Many BOJ officials remain cautious after September’s rate rise to a 31-year high and prefer to wait for clearer evidence on how past increases are working through domestic financial conditions.
- The BOJ uses an ‘underlying’ measure that strips out temporary factors such as one-off energy subsidies and this shift in language could affect borrowing costs, wage negotiations and corporate pricing decisions as policy tightens.