• The Bank of Japan is set to keep interest rates steady on Thursday.
• All eyes will be on the BoJ’s quarterly forecasts and Governor Kazuo Ueda’s press conference.
• The Japanese Yen could face intense volatility on the BoJ event risk.

The Bank of Japan (BoJ) is widely expected to maintain its short-term interest rate at around 0.25%, following the conclusion of its two-day monetary policy review on Thursday.

The BoJ decision will be accompanied by the bank’s quarterly outlook report, which will be released at around 3:00 GMT. Governor Kazuo Ueda’s post-policy meeting press conference will be held at 06:30 GMT.

What to expect from the BoJ interest rate decision?

The BoJ will likely keep interest rate unchanged for the second meeting in a row after announcing a surprise 15 basis points (bps) rate lift-off in July.

With a status quo outcome fully baked in, the central focus will be on the BoJ’s communication regarding further rate hikes, given Japan’s recent underlying inflationary trends, the rapid depreciation of the Japanese Yen (JPY) and ongoing political upheaval. Japan's ruling Liberal Democratic Party (LDP) headed by Prime Minister Shigeru Ishiba, lost its parliamentary majority in the snap election on October 27 – the first time in 15 years.

In that regard, the central bank’s updated projections for inflation and economic growth will play a pivotal role in the market’s pricing of the BoJ’s pace and timing of future rate increases.