Interest in Japan's Rate Decision on the 19th as Much as US Rates…"Focus on 0.25% Hold This Month"

91% of Japanese Market Participants Expect "Rate Hold in December"

Concerns Over Market Turmoil if US Cuts and Japan Raises Rates

On the 18th (local time), as much as the US Federal Reserve's rate decision, the market is watching whether the Bank of Japan (BOJ) will raise rates on the 19th. If the US lowers rates and Japan raises them, the narrowing interest rate gap between the two countries could affect the global capital market, including the movement of remaining yen carry trades.

In the most recent survey, over 90% of Japanese market participants expected the BOJ to maintain rates at the current level. This was the result of a survey conducted by the Japanese financial market brokerage firm Ueda Yagi Tanshi, targeting market participants from 150 banks and securities firms from the 12th to the 16th.

According to Reuters on the 17th (local time), 91% of all respondents expected the BOJ to maintain the short-term interest rate, the benchmark rate, at 0.25% this week.

However, 95% of respondents expected the overnight call rate, set as the BOJ's policy target, to rise in three months.

The BOJ ended negative rates in March this year and raised the short-term policy rate to 0.25% in July. After the rapid withdrawal of yen carry trade funds caused global market turmoil immediately following the July rate hike, the BOJ stated it would decide on rates while observing market conditions.

Recently, however, with Japanese consumer prices and wages on the rise, signals have been sent indicating a higher likelihood of a rate increase. The Bank of Japan reports that Japanese consumer prices are moving towards a 2% increase. This has led to many market expectations of a rate hike in Japan between December and January.

According to Reuters, the BOJ is inclined to maintain rates in December to better assess overseas risk factors and the additional rise in domestic wages next year.

Meanwhile, in a survey conducted by CNBC on the 16th with 24 Japanese economists, 13, or 54%, said the BOJ is likely to maintain the benchmark rate at the current 0.25%. Nine economists still expected a slight increase in the benchmark rate, considering the domestic wage and price situation.

Guest Reporter Kim Jeong-ah kja@hankyung.com