The Bank of Japan's Upcoming Meeting

Investing.com – The Bank of Japan (BoJ) is scheduled to meet next week, and analysts at Citigroup anticipate that the central bank will leave its policies unchanged due to external uncertainties.

> “We share the widely held view that policy will be left unchanged at the October 30-31 MPM (monetary policy meeting). The current consensus is a rate hike in either December or January (we envision December) but we do not expect the BoJ to signal for it vigorously in October given uncertainty around the approaching US election and payroll data,” said Citigroup analysts in a note dated Oct. 25.

Citigroup also indicates the potential for policymakers to deliver a hawkish message that they would respond swiftly to any increase in inflation risks, depending on foreign exchange levels during the meeting.

> “The BoJ will likely emphasize the continued trend of rate hikes while pointing to external uncertainty,” Citi added.

In light of recent yen weakness, the BoJ might prepare for an additional rate hike to 0.5% in its December or January meeting.

Although there may not be an immediate reaction for USD/JPY, further cuts by the Fed could gradually exert downward pressure on the pair. The USD/JPY may temporarily rise depending on the results of the US Presidential election.

From mid-November, uncertainties regarding the political landscape in Japan and the US and the Fed’s monetary policy are expected to ease, allowing the BoJ to begin preparing for the next rate hike.

Nevertheless, risks remain that pressures to expand fiscal measures will grow as the ruling Liberal Democratic Party (LDP) potentially loses seats, which could delay implementation.