MediumIV Macro Policy & Sovereign Debt6 October 2026, Tuesday · 08:35 TRT (UTC+3)
Ueda says rate rises will continue, but markets doubt an October move
Bank of Japan Governor Kazuo Ueda said on 6 October that the bank would keep raising rates. Overnight index swaps put the probability of a hike on 30 October at about 25%; the policy rate has stood at 1.25% since 18 September.
According to investingLive's preview, Ueda addressed brokers at 14:35 Tokyo time on 6 October. FXStreet's analysis of 6 October said Ueda stressed that anchoring underlying inflation around the 2% target had become more important. He cited three risks that could push inflation higher: the war involving Iran, AI-related demand and a weak yen. The bank raised its rate to 1.25% on 18 September, which investingLive notes is a 31-year high.
Markets, however, did not treat his remarks as a commitment for the 29–30 October meeting. FXStreet says overnight index swaps, contracts tied to the overnight interbank rate, price a 25–26% chance of a hike on 30 October. Tokyo core inflation rose to 2.7% in September from 1.8% in August. Core inflation excluding energy reached 3.0% in September.
The real constraint is the currency. FXStreet says the dollar was just above ¥160 in early September and fell below ¥153 within a week. As of 6 October the pair was trading in a ¥156.50–159.00 range. The 2.75-point gap between the BoJ and the Fed's 3.75–4.00% range, reached on 16 September, keeps pressure on the yen unless another hike comes.
Talay assessment
Bottom line
Ueda confirmed the direction but left the timing open, and markets read that as a pause in October. Even so, the jump in Tokyo core inflation to 2.7% and the weak yen keep the October meeting live. The most likely path is a hold on 30 October, with the bank's report pointing to a faster path ahead.
Likely effects
- YenNegativeWeeks
Without an October hike the rate gap stays wide and the yen could move back towards the ¥160 threshold, keeping import prices high.
- Japanese government bondsNegative1–6 months
Ueda's focus on inflation keeps the term premium, the extra yield investors demand for holding extended-maturity debt, elevated.
- Capital flows to TürkiyeUncertainWeeks
Trades that borrow in yen to buy higher-yielding assets would unwind quickly on a surprise hike, unsettling hot money in emerging markets such as Türkiye.
Possibilities, ranked
- 1Hold in October, signal for the next hike55%
The BoJ holds at 1.25% on 30 October but signals a faster path of hikes in its Outlook Report.
Watch: The 29–30 October BoJ meeting and Outlook Report
- 2Back-to-back hike in October30%
If October data are strong and the yen nears ¥160, the BoJ follows September's move with a second hike.
Watch: Tokyo core CPI for October and the ¥160 level in dollar/yen
- 3Extended pause15%
War-driven growth losses become clear and the BoJ waits several meetings to gauge the effect of the September hike.
Watch: Japanese wage and household spending data
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- BoJ policy rate▲ 1.25%
- Probability of 30 Oct hike▼ 25–26%
- Tokyo core CPI (Sep)▼ 2.7%