Japan's latest price and spending figures point in different directions ahead of the Bank of Japan's Oct. 29-30 meeting, while Standard Chartered expects the central bank to keep its rate at 1.25%.
FXStreet reported Oct. 22 that Standard Chartered's Chong Hoon Park expects the BOJ to hold its rate and retain a hawkish stance. January 2027 is the bank's base case for its next increase, though December remains possible. FXStreet quoted Park as saying, “While December is now a live meeting, January 2027 remains our base case for the next hike.” The forecast adds to earlier expectations for an October pause among sources cited by Reuters.
The BOJ set its overnight call-rate guideline at around 1.25% in September, up from around 1%. Seven board members supported the increase and two opposed it. The change took effect Sept. 24.
Preliminary Statistics Bureau of Japan data for Tokyo's 23 wards showed all-items consumer price index (CPI) rose 2.7% from a year earlier in September, compared with 1.9% in August. The measure excluding fresh food and energy increased to 3.0% from 2.0%.
Producer prices moved differently. The BOJ said its Producer Price Index fell 0.3% from August, while its annual increase slowed to 6.8% from 7.6%. Average monthly spending by households with two or more members was ¥310,975 in August, down 3.1% in real terms from a year earlier. It rose 0.1% from July on a seasonally adjusted basis, the Statistics Bureau reported.
In its September assessment, the BOJ described economic activity as improving at a moderate pace while acknowledging areas of weakness. It said underlying CPI inflation was moving closer to its 2% target. FXStreet reported that Standard Chartered sees further policy normalization as potentially making yield differences more supportive of the yen. Standard Chartered said further BOJ policy normalization could support the yen, particularly if the Federal Reserve resumes tightening or keeps policy restrictive for longer than expected.
The BOJ calendar lists Services Producer Price Index data and core CPI indicators for Oct. 27. The central bank's policy statement is scheduled for Oct. 30.
