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2025-10-30 10:04:24
[Bank of Japan Expected to Hold Rates Steady as Yen Depreciation Increases Pressure for Rate Hikes] 1. Markets widely expect the Bank of Japan to keep interest rates unchanged at 0.5% on Thursday, but will reiterate its determination to gradually raise borrowing costs to curb further yen depreciation and inflation. 2. Following US Treasury Secretary Bessenter's urging for a faster rate hike to avoid excessive yen weakness, exchange rate movements are under close scrutiny and could influence the central bank's statements on the path of rate hikes. Kazuo Ueda warned that the impact of US tariffs could intensify in the coming months. 3. Divergence within the Policies Committee has widened: hawks advocate for an immediate rate hike when conditions are ripe, while doves, led by Ueda, tend to wait for more data to assess the slowdown in US economic growth and the damage from Trump's tariffs. 4. The inauguration of the new, dovish Prime Minister Sanae Takaichi last week significantly reduced market expectations for an October rate hike. Insufficient communication between the central bank and the new government has led most to expect the rate to remain unchanged at the end of the meeting; hawkish committee members Naoki Tamura and Hajime Takada may raise objections, reiterating their recommendation to raise the rate to 0.75%. 5. Capital Economics economist Jonas Goltermann stated that Japan does have reasons to raise interest rates, but the central bank may not want to anger the dovish prime minister. If the status quo remains unchanged, investors will focus on Ueda's guidance on the timing and magnitude of interest rate hikes at his press conference. 6. Surveys show that most economists expect an interest rate hike in October or December, reaching 0.75% by the end of March. Despite inflation exceeding the target for three years, Ueda emphasized the need to be wary of tariffs disrupting the wage-price cycle; this meeting will also raise the growth forecast for the current fiscal year, maintaining the assessment of a moderate recovery.
