Between Interest Rate Forecasts and Market Expectations: Bank of Japan in Focus

Japan's political events are gaining momentum, as the parliament convenes for a special session from Thursday until December 21 to discuss, among other things, a supplementary budget. In such sessions, the Governor of the Bank of Japan (BOJ), Kazuo Ueda, often has to appear before the budget or finance committees to present his views on monetary policy and economic developments. Markets are eagerly anticipating this, as rumors of a possible interest rate hike have intensified. Currently, the likelihood of such an increase is about 60%, a significant rise compared to the beginning of November. Ueda has already promised to carefully manage the BOJ's communication, especially after the setback in August when an unexpected interest rate adjustment negatively impacted both the markets and the stock index. BOJ observers will therefore watch closely to see if Ueda provides clear signals to counter or support market speculations. Despite recent economic data that align with BOJ's forecasts and suggest a possible rate hike by January, Ueda emphasizes the uncertainty accompanying the abundance of new data leading up to the next board meeting on December 19.