BOJ May Signal Underlying Inflation Has Reached 2% Target, Sources Say

The Bank of Japan may signal as early as this month that underlying inflation has roughly hit its 2% target, three sources familiar with its thinking said, reinforcing market expectations of a December rate hike. The BOJ raised its key rate to a 31-year high in September, and Governor Kazuo Ueda said underlying inflation — demand-driven price trends stripping out one-off factors — was already quite close to 2%. A summary of September meeting opinions showed some members saying it would reach that level "in no time." Recent Tokyo consumer inflation data and the BOJ's quarterly "tankan" survey likely strengthened the bank's conviction, the sources said. However, the tankan showed corporate inflation moving sideways, easing pressure for a back-to-back hike at the October 29-30 meeting. The BOJ is expected to cite these factors in a quarterly report due after the meeting. Markets currently project the BOJ raising rates roughly once per quarter.