(Bloomberg) -- Bank of Japan Governor Kazuo Ueda gave the clearest hint yet that the central bank’s next monetary policy meeting will involve a live discussion over whether to raise interest rates.
“It’s impossible to predict the outcome of the meeting at this point,” Ueda said in response to questions at a Europlace forum in Tokyo on Thursday. “The next meeting is December, but there’s still a month to go. The vast amount of data and information will become available between now and then.”
With the remark, Ueda avoided boxing himself into a December rate hike while leaving his options open. He has repeatedly said that rate decisions will be made at each meeting and not in advance.
Still, the remarks highlight the chance of a rate hike in four weeks, as expected by around half of economists polled last month. More than 80% of surveyed BOJ watchers expect a move by January.
Market players are expecting the BOJ to give a clearer signal in advance of a rate hike than it did in July. A rate increase at that time blindsided some investors and was seen as contributing to a market meltdown in August.
The Europlace speech was seen as an unlikely venue for a major steer on the BOJ’s next policy decision. The governor largely spoke about the challenges for the financial industry as it faces technological advancements.
A speech in Nagoya earlier in the week seemed a much more likely moment for Ueda to telegraph a move if he intended to. In Monday’s speech, Ueda noted the outlook of the global economy and wage-inflation virtuous cycle as two key points for the next policy decision.
In response to a question Thursday, he reiterated that the bank will “seriously” assess the impact of foreign exchange rates on inflation and the economy. The yen is seen as a prime catalyst to push the Ueda to hike by many BOJ watchers. The currency has weakened in recent weeks to raise inflationary pressure via higher import costs.
Some economists say continued weakness in the yen even after direct currency intervention in July was a key factor behind the BOJ’s move that month. The government has already spent more than $100 billion propping up the yen so far this year.
A rate hike might offer some support for Japan’s feeble currency and relief for the government, but Ueda will also need to keep an eye on political developments.
Prime Minister Shigeru Ishiba’s ruling coalition no longer enjoys a majority in parliament. December is a key month for the government to compile next year’s budget. Some economists wonder if the bank can raise rates at a critical time for fiscal policy when the government needs the help of a smaller party opposing near-term rate hikes.
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