The expectation of a rate hike by the Bank of Japan has been significantly postponed until the end of the year, with the appointment of Takahide Kiuchi as a key variable.

According to the latest survey, observers of the Bank of Japan have significantly delayed their predictions for the timing of the next interest rate hike, which is in stark contrast to last month's expectations, with only a few predicting that the central bank will take action next week. The survey shows that out of 50 economists, about 10% predict that the Bank of Japan will raise the benchmark interest rate at the end of the two-day policy meeting on October 30, a significant decrease from the previous survey's 36%. December is the most anticipated time for a rate hike, with 50% of economists predicting action in that month, followed by 38% predicting in January of next year. After the victory of Kishida Fumio, expectations for a rate hike in October have dropped significantly. Kishida Fumio, known for advocating monetary easing, was sworn in as Japan's prime minister on Tuesday, having unexpectedly won the presidency of the ruling Liberal Democratic Party earlier this month. Although Kishida Fumio has avoided commenting directly on the pace of rate hikes, economists say that her leadership in Japan means that the Bank of Japan will need to communicate more carefully with the government when considering rate hikes. Masato Koike, a senior economist at Sompo Institute Plus, wrote in his survey response, "Even though Kishida Fumio's tone has softened, she is likely to still believe that rate hikes are not advisable. It is hard to imagine the Bank of Japan immediately hiking rates just after she takes office." Approximately 72% of respondents stated that Japan's unstable political situation reduces the likelihood of a rate hike by the Bank of Japan this month. Slightly over half of the respondents believe that if the Bank of Japan insists on raising rates at the meeting next week, it could jeopardize its relationship with the government. The median forecast of economists suggests that the termination rate of the current rate hike cycle is expected to be 1%, which basically means there will be two more rate hikes. Prior to Kishida Fumio becoming prime minister, analysts had predicted the termination rate to reach 1.25%. One focus of this meeting will be the voting results of the 9 members of the policy committee. At the September meeting, the Bank of Japan surprised investors with two members dissenting in favor of a rate hike. This was the first time such a situation had occurred since Haruhiko Kuroda became governor, with more than one vote against keeping rates unchanged. The summary of opinions from the previous meeting shows that the range of support for action is expanding. Approximately 38% of surveyed Bank of Japan observers expect more dissenting votes at the meeting next week, while 55% do not anticipate this change. Due to Kishida Fumio's assumption of office as prime minister and the lack of a clear indication from the Bank of Japan regarding rate adjustments, market expectations for policy adjustments this month are hovering around 10%, according to overnight index swap trading. This is in stark contrast to the 95% expectation just before the rate hike in January. "In principle, the Bank of Japan should hike rates this time, but the market's probability expectation of a rate hike is very low, which will make the Bank hesitant," said Masafumi Yamamoto, chief Japan economist at Mizuho Securities and former Bank of Japan official. "The focus will be on how much they will hint at the possibility of action in December." The Bank of Japan will release its quarterly economic outlook along with the policy statement next week. Some economists suggest that any significant adjustments could imply the possibility of a near-term rate hike. The median expectation of economists for the Bank of Japan's new forecasts for the next three fiscal years shows that analysts expect inflation and economic growth prospects to remain broadly unchanged, with only a slight upward revision in growth forecasts for this fiscal year. Most respondents believe that the Bank's risk assessment of price and economic prospects will also remain unchanged. After this month's policy meeting, the next meeting is not until about seven weeks later in December. Some economists point out that a challenge the Bank of Japan faces is maintaining market expectations of a rate hike to prevent further weakening of the yen a necessary condition to prevent a rekindling of inflation pressures. Earlier this month, the yen fell to an eight-month low against the dollar and has been hovering around the key threshold of 150. Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management, said, "Since there is a long gap before the December meeting, a key focus will be whether the Bank of Japan can convey a 'hawkish stance' to prevent excessive depreciation of the yen during this period while also avoiding friction with the new Kishida Fumio government."