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The Bank of Japan is anticipated to maintain its policy rate unchanged. Investors’ focus should remain on the bank’s rate path for the next few months. BoJ Governor Kazuo Ueda is seen sticking to the recent hawkish narrative. The Bank of Japan (BoJ) is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review.  The decision is set to be announced during the early Asian session. Notably, in March, the BoJ raised interest rates for the first time in 17 years, ending the negative interest rate policy that had been in place since 2016. On July 31, the central bank further surprised markets by hiking its policy rate by 15 basis points to 0.25%. What can we expect from the BoJ interest rate decision? As the meeting approaches, most expect a steady policy stance, but market participants will be closely watching for any shifts in the policy statement that might offer clues about when the bank plans to raise rates next. Currently, money markets are anticipating an increase of about 25 basis points by the end of the year, which would bring the bank’s policy rate to a maximum of 0.50% at the December 19 meeting. On the consumer front, real wage growth saw a positive turn in June (1.1% YoY) and July (0.4% YoY), which could encourage more spending and potentially push inflation higher. For now, inflation remains above the 2% target. These factors make it tricky for the central bank to decide when to raise interest rates. If rising prices driven by cost pressures start to weigh on consumer spending, it could hinder the demand-driven inflation the Bank of Japan aims for before it can consider scaling back its stimulus measures. Sanae Takaichi, a potential…

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Filed under: News - @ September 19, 2024 11:25 pm