On October 18, according to people familiar with the matter, the Bank of Japan may discuss raising its inflation forecast for fiscal 2023 and 2024 at its policy meeting later this month, extending the time for prices to reach or exceed the 2% target.。

People familiar with the matter said that in the new quarterly growth and inflation forecast to be released at the policy meeting at the end of October, the Bank of Japan may put the current fiscal year (through March 2024) inflation expectations from the current 2..5% up to 3%。In addition, the central bank is likely to raise its inflation forecast for fiscal 2024 to 2 percent or more, compared to the 1 percent forecast in July..9% increased.。

The move will mean the central bank expects inflation to remain at 2% or above for three consecutive years, a development that could fuel speculation about the Bank of Japan's policy normalisation.。In July, the Bank of Japan adjusted its yield curve control plan and revised its inflation expectations, raising concerns about the Bank of Japan's policy, with some investors seeing the July adjustment as a move to end the negative interest rate policy。

Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley, said: "The Bank of Japan may raise its inflation forecast, but may want to keep the easing policy framework unchanged for the time being.。Muguruma believes the BOJ may, after raising the ceiling, interpret it as aiming to make the framework more flexible.。But he also stressed that "doing so could put the BOJ's responsibility at risk because real interest rates would deviate too far from the 0% target."。"

Although Japan's new central bank governor Kazuo Ueda tried to reassure the market that policy would not change immediately, rising inflation and pressure from rising Japanese bond yields have made it increasingly difficult for the Bank of Japan to maintain its yield curve control (YCC) policy.。

On Wednesday, Japan's benchmark 10-year Treasury yield hit 0 after U.S. Treasury yields soared.815%, the highest level in a decade, close to the 1 set by the Bank of Japan in July..0% Hard Upper Limit。There has been speculation that the central bank may further adjust monetary policy.。

Under yield curve control (YCC), the Bank of Japan guides short-term interest rates to -0.1%, 10-year bond yield guidance of around 0%。In July, it moved the real limit on the 10-year Treasury yield from 0.5% to 1.0% to allow the rise in long-term interest rates to reflect more of an increase in inflation。

On Wednesday, the Bank of Japan announced an unplanned bond-buying operation, signaling its determination to slow the pace of the rise in sovereign yields。But bond futures remained down after the announcement。

But Kazuya Fujiwara, fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities, said: "It is difficult for the Bank of Japan to stop the upward trend in yields through its bond-buying actions.。U.S. and Japanese yields are correlated to some extent, and there is no sign that U.S. yields are peaking, which has also affected the rise in Japanese yields。"

Shoki Omori, chief strategist at Mizuho Securities in Tokyo, said: "Looking at Japanese government bond futures, when the additional operation was announced, it reduced losses but fell again, indicating that foreign investors may now be challenging the Bank of Japan.。"

If the Bank of Japan loosens its grip on long-term yields further, this could have a ripple effect on a range of assets around the world。In a recent survey, most analysts said they expect the BOJ to abandon the YCC by the end of 2024.。Most of them also expect an end to negative interest rates next year.。

According to people familiar with the matter, Bank of Japan officials do not believe that the Bank of Japan can currently achieve its 2% stable inflation target。They believe that inflation expectations for fiscal 2025 are likely to remain at the current forecast of 1.About 6%。The sources also said that BoJ officials prefer to wait until the Japanese economy can more surely withstand the adverse effects of a slowdown in overseas demand and allow companies to continue raising wages next year and beyond.。

So far, the Bank of Japan has stressed that wage growth will remain in sync with inflation until the central bank announces a stable price target。However, as of August, real wages in Japan had fallen for 17 consecutive months, and nominal wage growth had remained below 2 per cent in recent months.。Japan's largest trade union, the General Federation of Japan's Labour Unions, is reportedly planning to propose a 5 per cent pay rise in labour talks next spring。

The Bank of Japan will release its quarterly economic forecast and policy statement on October 31.。