To The Moon

A recent Bloomberg survey shows that more than 80% of BOJ watchers expect the central bank's next rate hike to take place in December, with no one anticipating a move at the policy meeting ending on October 30.

About 83% of economists expect the BOJ to raise its current policy rate of 1.25% at the policy meeting concluding on December 18. By contrast, only 35% of economists in last month's survey expected a December hike, when the most common expectation was that the next increase would come in January next year.

The latest survey also shows that 67% of respondents expect the BOJ to raise rates once every three months going forward, up from 46% in the previous survey. The BOJ hiked rates in June and September this year, the fastest pace since 1990, and surveyed economists expect the central bank to maintain that pace.

Many economists said the biggest focus of the October meeting will be how the BOJ assesses whether core inflation has reached its 2% target. Since the BOJ set its inflation target in 2013, it has never declared that goal achieved.

Keiji Kanda, chief economist at Daiwa Institute of Research, wrote in a survey response that if the BOJ determines core inflation has hit the target, the challenge ahead will be adjusting the degree of monetary easing to ensure inflation is firmly anchored at 2%. He expects the BOJ to raise rates in December and next March.

On Wednesday, BOJ Deputy Governor Ryozo Himino said during parliamentary questioning that the core inflation rate is already very close to the 2% target and is expected to remain consistent with that goal going forward, adding that a delay in policy adjustment could harm the economy.