The Bank of Japan (BOJ) announced on October 31 that it would keep the policy rate unchanged at 0.25%, meeting market expectations. This decision marks the second consecutive meeting of rate stability following the BOJ’s rate hike in July.

In its quarterly outlook report, the BOJ forecast that core inflation for fiscal year 2024 will remain around 2.5% due to easing pressures from import prices, with a gradual decline toward 2% expected between 2025 and 2026 amid moderate wage growth.

Regarding economic growth, the BOJ stated that Japan’s GDP growth has the potential to exceed its potential growth rate (0.5-1%) under conditions of continued financial easing and modest overseas economic growth.

In the post-meeting press conference, BOJ Governor Kazuo Ueda remarked that, if economic and price trends evolve as anticipated, the central bank would respond by raising rates. Ueda also noted that factors contributing to market volatility, such as weak U.S. economic data, are gradually fading and that market stability has improved. While the upcoming U.S. election poses a potential risk, the BOJ would not require extended time to monitor market conditions.

Ueda’s comments reinforced his traditionally hawkish stance. According to Bloomberg, the majority of economists now believe that the probability of a rate hike in January has increased, with market expectations for a January hike rising from 19% in September to 32% in October.