Bank of Japan Governor Kazuo Ueda delivered a series of hawkish remarks, signaling the central bank's readiness to potentially raise interest rates as early as December. Ueda underscored that delaying a rate hike for too long could trigger sharp inflation, forcing the BOJ into a rapid policy adjustment. He emphasized that the December policy decision would be based on a comprehensive assessment of wage information and other economic indicators.
The Governor also noted a significant easing of external economic pressures, stating that the risks tied to U.S. tariff impacts and the overall U.S. economic outlook have lessened substantially compared to several months ago. This marks a notable change in the BOJ's assessment, which previously highlighted "very strong" uncertainty from U.S. tariff policies. Ueda further elaborated that the BOJ intends to provide clearer guidance on its future rate hike path once the policy rate reaches 0.75%, though he acknowledged that determining the distance to a neutral rate remains challenging. He affirmed that the central bank would continue to adjust rates if economic and price movements align with forecasts, with the likelihood of the baseline scenario for growth and inflation "gradually increasing". Markets are now pricing in a 73% probability of a 25 basis point hike in December.
On the domestic front, Ueda mentioned that additional measures within the government's plan could theoretically boost growth and lift underlying inflation, but assessing their precise impact is currently difficult. He also pointed out that price-suppressing actions included in the government's stimulus package are expected to contribute to easing overall consumer price index (CPI). The Governor confirmed that he held candid and positive discussions with the premier and ministers, pledging to maintain close communication with the government, though he declined to elaborate on specific details of these conversations. He also highlighted that a mix of proactive fiscal policy from the government and the BOJ's adjustments to monetary support would help achieve a sustainable economic growth path.
Beyond Japan, global markets presented a mixed picture. Australia’s ASX 200 concluded the trading session down 0.6%, settling at 8,565.20. Meanwhile, India's manufacturing sector showed continued expansion, though at a slightly softer pace. The HSBC India Manufacturing Purchasing Managers' Index (PMI) for November registered 56.5, falling from 57.5 in October. Despite the dip, the reading remains firmly in expansionary territory, above the 50-mark.
In corporate news, HSBC announced a strategic partnership with Mistral, signing a deal to integrate the AI firm's tools into its operations. This move underscores the banking sector's increasing adoption of artificial intelligence for various functions. Separately, the automotive industry saw Stellantis (STLA) projecting an 11% drop in its car production in France by 2028. This anticipated decline highlights ongoing challenges within the European automotive market, including weak demand and the need for production capacity adjustments.
Finally, the Thai central bank chief reported that efforts are underway to tackle structural problems within the economy, and that collaboration with the Finance Ministry is proving effective. This comes amidst ongoing discussions about the country's economic challenges and the role of monetary and fiscal policies.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.