Markets are firmly convinced that the arrival of Prime Minister Sanae Takaichi will mean monetary policy will remain loose for longer. Since her elevation to Liberal Democratic Party leader on October 4 and subsequent confirmation as Prime Minister on October 21, investors have assumed the Bank of Japan will continue with ultra-accommodative settings aligned with the legacy of Abenomics.
Yet underlying economic data point toward conditions that could justify a more hawkish stance, inclduing:
- BoJ Tankan survey showed a modest improvement in large manufacturers’ sentiment to +14 in September, up from +13 in June
- Wage growth and inflation dynamics are gradually reinforcing one another
- The broader economy has remained resilient despite U.S. tariff hikes
Despite all this, Bank of Japan Governor Ueda has maintained a cautious tone, stressing the need for coordination with the new administration before adjusting rates:
- Ueda says that the Tankan results do not yet capture the drag from U.S. trade measures
- Political consultation could delay the next move, the incoming government has the option to request the BoJ’s board to postpone policy changes.
Most analysts expect the BoJ to hold rates steady at its meeting today, while leaving open the possibility of tightening later. Ueda may emphasise that further yen depreciation could feed inflation through higher import prices, an issue likely to resonate with Prime Minister Takaichi, who has made living-cost pressures a core political concern.
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Earlier:
- Preview - BOJ expected to hold rates as Takaichi’s fiscal tilt and U.S. risks weigh
- BofA sees BoJ hiking rates in January after hawkish October hold
There is no scheduled time for the policy announcement
- 0230 to 0330 GMT is a to be a reasonable expectation
Governor Ueda will follow up with his press conference at 06930 GMT.
