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The Bank of Japan's fierce debate has been exposed! Is interest rate hikes in October imminent? The former committee member provides key information
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Hello everyone, today XM Forex will bring you "[XM Forex Decision Analysis]: The Bank of Japan's fierce debate is exposed! October interest rate hike is xn--xm-6d1dw86k.coming? The former xn--xm-6d1dw86k.committee member provides key information." Hope it will be helpful to you! The original content is as follows:
Former Bank of Japan review xn--xm-6d1dw86k.committee member Seiji Adachi said that the Bank of Japan may raise its economic and inflation forecasts in the next quarterly assessment, which may pave the way for a rate hike in October.
The market expects the Bank of Japan to raise interest rates at its next policy meeting from October 29 to 30 at about 50%, when the Policy xn--xm-6d1dw86k.committee will also release its latest quarterly economic growth and inflation forecasts.
Bank of Japan Governor Kazuo Ueda stressed that when deciding when to restart interest rate hikes, it is necessary to carefully evaluate the expected impact of US tariffs on Japan's economy and wage outlook.
Possible Options Under Risk Direction
Seiji Adachi pointed out that based on a risk-centered policy orientation, the central bank may postpone interest rate hikes until around March next year, and will more clearly determine whether the tariff shock will affect wage negotiations next year.
But he also said that the possibility of a rate hike in the Bank of Japan at its next meeting in October cannot be ruled out, as stronger-than-expected economic growth in the second quarter could push up the xn--xm-6d1dw86k.committee's growth forecast and keep inflation near its 2% target.
Seiji Adachi said: "Another 25 basis points increase in interest rates will have limited impact on economic growth, as borrowing costs will still be lower than what is considered neutral to the economy."
If the Bank of Japan is more concerned about the downside risks of the economic outlook, it is likely that interest rate hikes will not be available in October, given recent data showing signs of weakness in exports and corporate profits. "But if the board raises growth expectations and corrects the current forecast that inflation will briefly fall below 2%, there is little reason for the Bank of Japan to continue to pressThe soldiers remained motionless. ”
The Bank of Japan kept interest rates unchanged at 0.5% last week, but two members objected and proposed a rate hike to 0.75%, a move that pushed up Treasury yields as market expectations of a possible rate hike in the near future.
Existing forecasts and latest economic performance
In the current report released in July, the board of directors expects the economy to grow by 0.6% this fiscal year (the fiscal year began in April) and the growth rate in fiscal year 2026 will reach 0.7%. Core consumer inflation is expected to reach 2.7% in 2025, and then slowed to 1.8% in 2026.
The Bank of Japan will re-evaluate its economic outlook forecast at its meeting on October 29-30, referring to multiple information including the latest data. The data showed that the annualized growth rate of Japan's economy in the second quarter was 2.2%, which was higher than that of Initial expectations are mainly driven by strong consumption.
Seiji Ada said that the quarterly "short-view" corporate survey to be released by the Bank of Japan on October 1 may also affect the bank's decision to raise interest rates next month. Japan's current core inflation rate of about 1.7% accelerates from 2.3% in the last survey to 2.5%, it may hit the Bank's target of 2%.
Policy Outlook
Governor Ueda Kazuma pointed out that if the Bank of Japan is more confident that potential inflation will continue to reach the 2% target, it will continue to raise interest rates gradually. He emphasized at a press conference last week that the potential inflation rate has not yet reached the 2% level.
Seiji Ada analyzed: "Because the risk of over-reduction in inflation is not high, the Bank of Japan does not need to rush to raise interest rates. To a certain extent, the central bank has the initiative in the timing of interest rate hikes. ”
The survey conducted before the Bank of Japan meeting showed that most economists expected another 25 basis points to raise interest rates by the end of the year. However, respondents had differences on the time point of interest rate hikes, and bets were mainly concentrated in October and January.
Analysis of the impact of the Bank of Japan policy outlook on the yen
According to the remarks and related information of former Bank of Japan review xn--xm-6d1dw86k.committee member Seiji Adachi, the Bank of Japan's policy direction is at a critical crossroads, which will have a significant impact on the yen exchange rate.
The results of the October meeting were released Previously, any positive economic data (especially inflation and salary data) or hawkish remarks from officials may strengthen the October interest rate hike expectations, thereby driving the yen to appreciate. On the contrary, if the data is weak or officials release dovish signals, the yen may fall under pressure.
The market's game on interest rate hike expectations will intensify the yen's volatility in the short term, while the medium- and long-term trend depends entirely on whether the Bank of Japan can start and continue its monetary policy normalization process.
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