Japanese Yen: Why does the BoJ’s hawkish hold keep a January hike in focus? – Standard Chartered

A hawkish tone is expected from the Bank of Japan even as it holds its policy rate at 1.25% at the 29-30 October meeting, according to Standard Chartered’s Chong Hoon Park. While the bank flags firmer Tokyo CPI and PPI readings and upside risks to inflation, it also points to subdued consumption and weak domestic demand. A rate hike in December is considered a live possibility, though January 2027 remains the base case for the next increase.

What does the BoJ’s policy stance mean for JPY?

"We expect the Bank of Japan (BoJ) to keep the policy rate unchanged at 1.25% at its 29-30 October meeting, following September’s 25bps hike."

"However, we expect policy makers to maintain a clearly hawkish tone."

"As a result, the debate is increasingly shifting from whether the BoJ will hike again to when the next hike will occur."

"While December is now a live meeting, January 2027 remains our base case for the next hike."

"At the same time, the BoJ has an incentive to continue policy normalisation to support yield differentials and reduce the risk of renewed JPY weakness, particularly if the Fed resumes tightening or maintains a restrictive policy stance for longer than expected."

(An editor reviewed this article, which was produced with assistance from an Artificial Intelligence tool. Learn more.)