Raise interest rates this month "leave room"! The latest statement from the Governor of the Bank of Japan does not rule out the possibility of raising interest rates.

The Governor of the Bank of Japan, Haruhiko Kuroda, stated that if confidence in achieving economic expectations increases, the central bank will continue to implement a tightening policy - meaning there is still a possibility of a rate hike in the short term. Kuroda said, "Our stance will not change, that is, even if our confidence in achieving the targeted goals strengthens, we will adjust the degree of monetary easing." Since last year, the Bank of Japan has been gradually reducing monetary stimulus measures through rate hikes and adjustments to its balance sheet policy. However, Kuroda indicated that he may wait until the last moment of the next policy committee meeting to make a decision. He said he plans to continue gathering information during ongoing international conferences and assess the data received before making a decision at the interest rate meeting on October 29th and 30th. Financial markets expect the likelihood of a rate hike by the Bank of Japan at the end of this month to be low. But Kuroda reiterated the Bank of Japan's existing stance, indicating that the bank has not ruled out the possibility of taking action in the short term, even amidst domestic political turmoil and escalating tensions between China and the U.S. Kurodas remarks come after Sanae Takaichi's unexpected election as leader of the ruling Liberal Democratic Party earlier this month. Takaichi is known for criticizing the Bank of Japan's tightening policies, and her election has unsettled the markets and significantly lowered expectations of a rate hike in the short term. According to overnight swap trading data, traders currently believe there is about a 17% chance that the Bank of Japan will take action this month - compared to just a few weeks ago when the probability was as high as 68%, with two central bank members calling for policy tightening and a dovish member making hawkish comments. Political uncertainty has made the situation even more complex. The long-time coalition partner of the Liberal Democratic Party, Komeito, withdrew from the ruling coalition last week, making the prospect of Sanae Takaichi becoming Japan's first female prime minister even more uncertain. Currently, she is seeking support from the Japan Innovation Party in Osaka, while other opposition parties are also exploring options to unite against the Liberal Democratic Party. Despite the broader instability reducing the prospects of policy normalization in the short term, the continued weakness of the yen could put pressure on the Bank of Japan to act before inflation worsens. When asked about the impact of domestic political instability on policy-making, Kuroda did not provide a specific response. Earlier this month, Kuroda pointed out that several aspects should be monitored, including the global economy (especially the U.S. economy) and the impact of the U.S. on Japanese corporate profits. On Thursday, Kuroda stated that members of the G20 believe that the global economy as a whole is resilient but still faces high levels of uncertainty and complex challenges - including geopolitical and trade tensions. He said financial leaders see these issues as potential factors that could slow economic growth and pose risks to financial and price stability. Kuroda also noted that the impact of tariffs is slowly materializing and may only be evident in the coming months. He said, "Many institutions and observers are still incorporating tariff factors into their forecasts or viewing them as potential risks when evaluating the global and U.S. economy."