83% of Economists in Bloomberg Survey Expect Bank of Japan Rate Hike in December
Key Facts
83% of economists surveyed by Bloomberg expect the Bank of Japan to raise interest rates in December, according to a Standard Chartered note dated October 22, as inflationary pressures persist in Japan's economy. The note said the expected increase would be from the current 1.25%, with the bank describing underlying inflation as approaching 2%. In a separate Reuters poll published ahead of the October meeting, most respondents expected interest rates to continue rising through the end of next June. 39 of 65 analysts, or 60% of respondents, expected the policy rate to reach 1.75% by then. The Reuters estimate concerns the interest rate level at the end of that period, while the percentage cited by Standard Chartered concerns the expected timing of a hike in December.
The September monetary policy decision was approved by 7 votes to 2, according to the Bank of Japan's statement, revealing divisions on the board over the decision. The statement identified the dissenting members as Toichiro Asada and Ayano Sato, who voted against the measure approved by the majority. In its assessment at the time, the bank said underlying inflation was "approaching 2%," the wording it used to describe price developments at the September meeting. The meeting's Summary of Opinions also included a view calling for a faster pace of tightening if signs emerged that prices were rising above the expected path. That opinion stated: "If signs of an upward deviation in prices are observed, the bank will need to accelerate the pace of interest rate hikes." On the market reaction following the September decision, Reuters said opposition to the hike briefly pushed the yen lower, while the Associated Press reported that the Nikkei rose 1.4% after the decision was announced.
Drivers of inflationary pressure include rising energy and import costs, according to Reuters, which linked the worsening costs to the weak yen and the Middle East war. In the latest trade figures for September, Japanese imports rose 18.9% from the same month a year earlier, according to the Associated Press. Import growth outpaced export growth, which reached 16.7% year-on-year in the same month. The trade balance recorded a deficit of 536.6 billion yen, according to Reuters, exceeding expectations for a deficit of 181 billion yen. The deficit coincided with a slowdown in export growth compared with August, when exports rose 19.3% year-on-year. Nevertheless, Reuters said strong global investment in artificial intelligence continued to support Japanese exports of semiconductors and related equipment.
The upcoming schedule begins with the release of September's national consumer price index on October 23, according to the official schedule of Japan's Statistics Bureau, in Japan local time. The Bank of Japan then holds its monetary policy meeting on October 29 and 30, according to its published meeting schedule. The final day of the meeting coincides with the release of Tokyo's preliminary consumer price index for October, officially scheduled for October 30 in local time. After the meeting, the bank's calendar lists November 2 for publication of the full text of the October Outlook for Economic Activity and Prices. The December meeting, the focus of rate hike expectations in the Bloomberg survey cited by Standard Chartered, is scheduled for December 17 and 18.