Bank of Japan: Gradual tightening path and neutral rate debate – ING

FXStreet Insights Team FXStreet

ING analysts Chris Turner and Padhraic Garvey see the Bank of Japan maintaining its tightening bias after June’s move to 1.00%, with most board members viewing Japan’s neutral rate near 2.00%. While some officials may favour an earlier hike in September or October, ING expects the upcoming decision to leave policy unchanged, with markets watching voting patterns and Governor Ueda’s guidance closely.

Neutral rate seen near two percent

"When raising the policy rate to 1.00% last month, the BoJ retained its tightening bias and concluded that a further removal of monetary accommodation would be required. As always, the timing of such an adjustment would depend on developments in economic activity, prices, and financial conditions."

"Weakness in the yen after the (not unsurprising) ineffectiveness of the BoJ’s FX intervention in April/May this year has led some to speculate that the BoJ will accelerate its tightening cycle. Many of the BoJ board believe that Japan’s neutral policy rate is closer to 2.00% and it’s just a question of how quickly it is taken there."

"Recent source reports suggest some BoJ members could favour the next hike as early as September or October as opposed to the gradual six-monthly schedule of the next hike coming in December."

"As to the decision, anything other than an unchanged 1.00% policy rate would be a surprise. There could be some interest in the voting patterns. Governor Kazuo Ueda is expected to return after a recent illness, bringing the Policy Board back to nine. The focus will be on whether any of the board members will vote for back-to-back hikes. Kajime Nakata did so in January this year and could be a candidate to do so again this week. A bigger surprise would be whether the other two hawks, Junko Nakagawa and Naoki Tamura, join him."

"Governor Ueda’s press conference will be of interest, but unless he hints about the need for a faster tightening cycle, markets look unlikely to react. Remember that representatives of the Cabinet Office attend these meetings and BoJ minutes reflect their views that Japan’s ‘transition to a growth-oriented economy is crucial’. Understandably, investors see the BoJ exposed to more government oversight on monetary policy than many in their G10 central banking peer group."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD jumps to 0.7050, fresh one-month top after hot Australian CPI

AUD/USD attracts buyers for the second straight day on Wednesday, rising to a fresh high since September 23 during the Asian session. A hot Australian CPI print reaffirmed bets for an imminent RBA rate hike in November and boosted the Australian Dollar. Meanwhile, the US Dollar pauses after a three-day rally to a near two-week high ahead of the crucial FOMC rate decision, lending additional support to the currency pair.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold extends pullback from weekly top, further below $4,050 as focus remains on FOMC

Gold extends its retracement slide from the weekly high touched during the Asian session, falling further below $4,050 heading into the European session and ahead of the key central bank event. The US Federal Reserve is scheduled to announce its policy decision later today and is widely expected to keep rates unchanged. Hence, the focus will be on the accompanying policy statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference.

Zcash's bullish momentum mounts on steady ETF inflows, retail confidence

Zcash extends steady recovery above $1,300 on Wednesday, approaching a key resistance near $1,373. Grayscale’s ZEC-focused Exchange-Traded Fund sees persistent buying pressure, with six straight days of inflows, including more than $3 million on Tuesday.

FOMC outlook: Why keeping rates unchanged might not be enough

Tomorrow's FOMC meeting could be quite interesting, even if the Federal Reserve decides to leave interest rates unchanged. According to the latest market expectations, there is currently a 92.8% probability that rates will remain at 3.75–4.00%, while the probability of another 25 basis point increase stands at just 7.2%.

Anthropic pledged $270 billion to Amazon, Google, and Microsoft. Here's who actually gets paid

Anthropic owes Amazon, Google, and Microsoft at least $269.4 billion for computing power, even if it uses less. All three sell its models and handle its billing, and Amazon and Google own stakes and lend it money, so they get paid regardless of how the IPO goes. The Dario Amodei-led Anthropic filed its initial public offering (IPO) on Monday, seeking a listing on the Nasdaq under the ticker ANT.