The Bank of Japan may signal that underlying inflation has roughly reached its 2% target, strengthening expectations of further rate increases.
The Bank of Japan may signal later this month that underlying inflation has roughly reached its 2% target, according to three people familiar with its thinking cited by Reuters. The signal would reinforce expectations that the central bank remains prepared to raise rates again.
The indication would be largely symbolic but important for markets because investors already expect another increase, potentially in December. The BOJ has stressed that it wants underlying inflation anchored around its target when deciding the pace of policy tightening.
Policymakers are cautious about another immediate increase after raising rates in September and want more evidence on the effect of earlier moves on financial conditions.
Recent Tokyo inflation data and the BOJ's tankan business survey may strengthen the bank's conviction that underlying inflation has reached the desired level. The next policy meeting is scheduled for October 29-30.