BOJ Likely to Keep Rates Steady in December, Sources Say

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The Bank of Japan (BOJ) is expected to keep interest rates unchanged in its upcoming meeting next week, as policymakers focus on evaluating overseas risks and gathering more information about next year's wage growth.

While some board members believe Japan may have met the conditions for a rate hike in December, the decision will likely depend on whether wage-driven inflation is sustained. 

If the BOJ holds off on a rate increase, it would set the stage for a potential hike in January or March when clearer data on wage trends is available.

However, there is a slim chance the BOJ might act earlier if external events, like the U.S. Federal Reserve's meeting, trigger a sharp depreciation of the yen and push inflation higher. 

Overall, many BOJ members are in no rush to raise rates, as inflation remains moderate, and Japan’s near-zero borrowing costs are not causing significant price overshoots.

The central bank's cautious approach is echoed by government officials, who believe the economy should recover further before tightening policy. The BOJ's decision is likely to be influenced by upcoming wage negotiations and corporate statements on pay hikes. 

Furthermore, external risks, such as uncertainty over U.S. President-elect Donald Trump's economic policies, are also weighing on the BOJ's decision. While inflation pressure from raw material imports has eased due to the yen’s rebound, the BOJ will carefully monitor economic data before making a move. 

Markets are currently pricing in a lower chance of a rate hike in December, with expectations of a potential increase in March. However, any surprise action from the Federal Reserve, such as a rate hold, could force the BOJ to reconsider its stance to prevent excessive yen depreciation.

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.