BOJ poised to claim core inflation has reached 2% target, hinting at further hikes

According to three sources familiar with the Bank of Japan's thinking, the central bank may use this month’s policy meeting to state that underlying inflation has roughly reached its 2% objective. While such a declaration would be mostly symbolic, it would cement market expectations of a further rate hike in December and signal readiness for incremental tightening. The BOJ, which raised its key rate to a 31-year high in September, remains cautious about a back-to-back increase and is awaiting more evidence on the impact of previous hikes on domestic financial conditions.

Recent data, such as Tokyo’s consumer-price numbers and the latest tankan business survey, are said to bolster confidence that inflation is near the target, even as corporate price growth appears stagnant. Governor Kazuo Ueda has emphasized the need to prevent inflation from overshooting, and the upcoming October 29-30 policy report is expected to reference these factors. Analysts note that a weaker yen could add pressure for another hike, but diminishing expectations of a U.S. rate move this month ease some of that urgency.