"Domestic political situation" and "US presidential election" are leading to a weakening yen! What is the possibility of a December rate hike at the uncertain Bank of Japan meeting? [BOJ Meeting Preview]

With the Bank of Japan preparing for the monetary policy decision meeting on the 30th and 31st, new uncertainties have arisen. Following the ruling coalition of the Liberal Democratic Party and Komeito falling below a majority in the Lower House election on the 27th, the political situation has become unclear, and the yen has depreciated The focus of the October meeting is whether there will be any signals regarding the third interest rate hike of the year at the next December meetingHow are you?
The Bank of Japan will announce the decision around noon on the 31st, and Governor Kuroda's press conference is scheduled for the afternoon. Given the significant uncertainties, including the U.S. presidential election on November 5, there is attention on what kind of message will be conveyed.

The likelihood of keeping interest rates unchanged at the October meeting.
At the previous September meeting, Governor Kuroda mentioned during the press conference the determination towards rate hikes, stating that there is "enough time". This was perceived as a shift toward a dovish stance by the market."There is some flexibility in timing"."It is important to carefully assess whether the U.S. economy will have a soft landing" and "The outlook has become clearer, therefore, an immediate rate hike is not foreseen." This suggests that the policy interest rate is likely to remain unchanged in October."I want to carefully assess whether the U.S. economy will land softly" and "The certainty of the outlook has increased, so it will not be an immediate rate hike."It is likely that the policy interest rate will remain unchanged in October as well, given the statements made.
Summarizing the content of President Ueda's press conference,At the October meeting, a summary was provided on the outlook of the US economy and the impact on exchange rates as well as domestic price outlook, with the publication of the economic and price situation outlook report. Following that, the consideration of the timing of a rate hike was suggested.It was hinted at in the flow of events that President Ueda mentioned, "There is no set schedule or pace as to when a rate hike would progress based on how well the economic data align with the expectations."
In a survey by Bloomberg of 53 economists conducted from October 17 to 22,Regarding the timing of a rate hike by the Bank of Japan, only 2% mentioned October, while 53% indicated December and 32% January 25 (Bloomberg dated the 24th).This was based on a Bloomberg survey of 53 people conducted from October 17 to 22.

Are macro indicators from the Bank of Japan's "Ontrak"?
In terms of the economic and price situation, it seems to be within the range expected by the Bank of Japan (Ontrak). The consumer price index for Tokyo's 23 special wards in October, excluding fresh food core CPI, announced by the Ministry of Internal Affairs and Communications on October 25, showed a 1.8% year-on-year increase, falling below 2% for the first time in 5 months. However, food prices excluding fresh food increased by 3.8%, with Bloomberg on the same date attributing it to "the government's measures to combat high prices"."The Bank of Japan's stance on interest rate hikes has no impact.and it is said that there is a view that.
Data showing strong performance of the US economy, which had a 0.5% interest rate cut in September as a "precautionary measure", has been observed, leading to the expression "soft landing"."No landing"is starting to be used.
Bank of Japan Governor Ueda stated on the 23rd in Washington, USA, "Efforts towards financial normalization have just begun," and there seems to be no change in the intention to proceed with gradual interest rate hikes" (Nikkei, 24th).

Are you running out of "time flexibility"?
If economic data is considered the "Ontrak" for the Bank of Japan, then the "Offtrack" would be the "political" issue.
Governor Ueda's interpretation of the basis of "time flexibility" mentioned recently, "Considering the recent exchange rate trends, I believe the risk of inflation overshooting due to yen depreciation has decreased appropriately," is already showing signs of deviation.Before the Bank of Japan meeting in September, on September 16 of the same month, the yen appreciated to the 139 yen level against the dollar, but then quickly depreciated. Currently, the yen has depreciated to around 153 yen.Is

Will interest rate hikes become difficult due to being swayed by politics?
Not only does the Bank of Japan risk losing its "time flexibility" due to "government" interference, but it cannot deny the potential loss of the option of interest rate hikes itself.There is also the possibility of losing the option of interest rate hikes itself, beyond just the risk of losing the "time flexibility" due to political factors.There is also the possibility of losing the option of interest rate hikes itself, beyond just the risk of losing the "time flexibility" due to political factors.
Both the Liberal Democratic and Komeito parties, as well as the Constitutional Democratic Party, are in a tug-of-war situation, each holding the casting board.The Nippon Ishin no Kai and the Democratic Party for the People advocate for tax cuts in their party policies, aiming to address high prices. While highlighting concerns about high prices, they take an accommodating and expansive stance on economic and fiscal policies.During the "Black Monday of Reiwa" in August, executives of both parties criticized the Bank of Japan's rate hike in July as being too hasty.Criticism from Ishin and the Democratic Party for the People is increasing towards the administration, with the sentiment that "we dislike high prices due to a weak yen, and we dislike financial policies that seem to lead to economic downturn even more", which could narrow down the Bank of Japan's options that should ideally respect autonomy.Is
As the influence of Nippon Ishin and the Democratic Party for the People in the government grows, the available choices for the Bank of Japan, which should ideally respect autonomy, are becoming limited.If the sentiment of "disliking high prices due to a weak yen, and disliking financial policies that might lead to economic downturn even more" strengthens, the Bank of Japan's options, which should ideally respect autonomy, will be narrowed, despite the usual respect for independence.This is also anticipated.
In the midst of the 'variables' such as the US presidential election, it will be interesting to see how Governor Ueda can communicate up to the December meeting.