Commerzbank’s Michael Pfister reports that the Bank of Japan (BoJ) left rates unchanged after September’s hike, but delivered a hawkish signal by indicating underlying price pressures have reached the 2% target. A further rate increase in December is seen as increasingly likely and almost fully priced. Any additional hints from Governor Kazuo Ueda could give the Japanese Yen modest support near term.

BoJ holds but December hike nears

“As expected, a few hours ago the Bank of Japan left its key interest rate unchanged. Anything else would have been a major surprise, given the rate hike in September.”

“Although officials have recently suggested that the pace of rate hikes could accelerate, they are unlikely to act quite so quickly. However, the BoJ did send a hawkish signal: For the first time, it was indicated that underlying price pressures had reached the 2% target.”

“Nevertheless, following this indication, the further interest rate hike in December – which we had also anticipated – is likely coming closer.”

“If the BoJ Governor, Kazuo Ueda, provides further clues on this matter at the press conference at 6:30 UK time, the yen could strengthen slightly once again, even though the December move is now almost fully priced in.”