Overview
- In early October the Bank of Japan is preparing to state in its quarterly Outlook that 'underlying' inflation is roughly at the 2% target, a move described by multiple sources as largely symbolic but important for market expectations.
- 'Underlying' inflation is the BOJ's measure of trend price gains that strips out temporary items such as one‑off subsidies and volatile fuel costs so the bank can judge durable price pressure.
- Officials and markets say the acknowledgement would strengthen bets that the BOJ could raise its policy rate again in December, though many board members prefer to see more data on how June and September hikes feed through to the economy.
- Policy board member Ayano Sato, who dissented in September, now backs gradual further rate increases but cautions that weak private consumption and rising crude oil prices linked to the Middle East raise downside and upside risks to the outlook.
- The move reflects a shift from long‑running accommodation to gradual normalisation after rate increases in June and September that pushed the policy rate to 1.25%, and it raises the chance of higher borrowing costs for households and businesses if the BOJ tightens further.