Bank of Japan seen holding rates at October 30 meeting
Bloomberg reports that cooling producer prices have fuelled bets the central bank will skip a hike this month.
Published
Bloomberg reported on October 12 that Japan's producer price index rose 6.8% in September from a year earlier, down from 7.6% in August, a slowdown that has fed views the Bank of Japan will leave rates unchanged at its October 30 meeting.
The bank's policy rate stands at 1.25% after a September increase, the level Governor Ueda has signaled as part of a continued tightening path. Officials have repeatedly said decisions will depend on incoming data rather than a fixed timetable.
Markets are still pricing a strong chance of one more increase by January, with many investors expecting it in December, according to overnight index swap pricing cited by Bloomberg. The 10-year Japanese government bond yield touched a 28-year high near 3.11% in late September on tightening expectations, before falling 5.5 basis points to 3.025% on October 8.
A hold this month would likely be read as a delay rather than a change of course, given Tokyo inflation readings that have run above forecast and Citigroup's call for further BOJ hikes through 2027. The main route by which Japanese policy reaches US markets is the yen-funded carry trade, and a confirmed pause would remove a near-term trigger for that trade without shifting the broader gap between Japanese and US interest rates.