BoJ interest rate decision preview

After alluding to the likelihood of a review in their previous monetary policy meeting, the October iteration will be a highly watched one and could see to JPY reactions given the current mixed views within the market.

October review

The Bank of Japan (BoJ) meets this week over October 30-31 and will announce their monetary policy decision at the end of their meeting. After the European Central Bank headed deeper into negative territory, and the Federal Reserve looking set to deliver their third rate cut for the year this week, a good portion of the market can be seen holding hopes for the Bank of Japan to follow suit. Calls for easing according to Reuters poll had increased to a two-third majority from approximately a quarter ahead of the previous September meeting.

Indeed, the BoJ had highlighted that they will review the economy and inflation in September after emphasising that they could ease pre-emptively in July. This is as economic data out of Japan reflected little signs of improvement going into Q3 while the geopolitical situation had earlier shown few signs of letting up as well. Tokyo CPI released for the month of October had unexpectedly disappointed against Reuters consensus despite the introduction of the sales tax hike in October.

Fast forward to the upcoming meeting, however, a better geopolitical backdrop looks to be the case particularly with US-China ‘Phase One’ deal likely to be signed in the horizon. This had also helped to ease pressure of a strong Japanese yen that would have otherwise provided impetus for the BoJ to act. While the BoJ had not explicitly spelled out that they will be reviewing policy as compared to economic conditions, reports from the likes of Bloomberg had also suggested that the BoJ may be holding fire this meeting, cumulating in the mixed views within the market.

Trading the BoJ release

A move to lower short-term rates in line with some of the calls would be one to lift the USD/JPY pair amid the current uncertainty over the meeting conclusion. This would likewise help with equities, watching the financial sector as the BoJ is not expected to turn a blind eye to the banking sector that had been bearing the brunt of the negative interest rates regime.

Even if the BoJ choose to leave things unchanged in the upcoming meeting, which is very likely given the recent stabilization in geopolitical conditions and the limited toolbox, we may be seeing the BoJ maintain the dovish stance at the very least that should help to keep the USD/JPY supported. New growth and inflation forecasts are also expected to reflect the moderating conditions that likewise builds the BoJ’s dovish inclination.

Looking at USD/JPY, we have seen prices shooting past the $108 level into October to test the $109 handle ahead of the BoJ meeting. This comes on the back of the abovementioned slew of factors, particularly the improvement in the mood surrounding the US-China trade issue. The potential for the BoJ to go ahead with a pre-emptive move keeps the bias on the upside towards the $110 handle, but any disappointment may see measured reaction. Support comes in immediately at the $108.83 resistance-turned-support ahead of $108.19.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.