The Bank of Japan is expected to hold policy at Friday’s meeting while declaring
its near-14-year push to hit a 2% inflation target largely successful and
flagging upside inflation risk, keeping the option of a December rate hike open.
Officials are likely to avoid firm guidance on timing or pace, preferring a
gradual tightening to balance inflation overshoot risk against the danger of
disrupting strained markets, according to people familiar with BOJ thinking. The
BOJ may nudge up next fiscal year’s inflation forecast in its quarterly report
and signal that underlying inflation is roughly at the 2% target. Policymakers
will weigh incoming data and market moves when deciding between a December or
January rate increase. Mitsubishi UFJ Morgan Stanley Securities’ chief
fixed-income strategist Naomi Muguruma called the moment pivotal, saying the BOJ
must both press the accelerator and apply the brakes.
