The Bank of Japan (BOJ) is facing increasing pressure to adjust its monetary policy as Japan's October inflation data continues to surpass its 2% target. Despite the prolonged period of core consumer price growth above the target for 19 consecutive months, the BOJ has been hesitant to pivot, emphasizing that it is awaiting Spring wage negotiations.

According to the latest data, Japan's inflation, excluding volatile fresh food costs, picked up slightly in October after a period of easing. This persistent inflationary pressure has raised concerns among analysts, leading SMBC Nikko Securities to anticipate a BOJ policy shift in April next year.

SMBC Nikko Securities expects the central bank to end negative interest rates and remove yield control in April, citing the results of labor-management wages talks and the ongoing efforts by companies to pass on costs. The BOJ, however, has maintained that inflation pressure is largely a result of higher global commodity prices and a weaker yen, which it deems unsustainable. The bank emphasizes that sustainable price gains should be driven by stronger domestic demand and wage growth.

In response to inflationary pressures, the Bank of Japan has made its 10-year yield target more flexible, pushing Japanese Government Bond (JGB) yields closer towards 1%. However, today's data indicating that inflationary pressures are more stubborn than expected has reignited speculation about the BOJ's negative interest rate policy and yield curve control.

The Bank of Japan is set to convene for its next meeting on December 18 and 19. Analysts and market participants will be closely watching for any shifts in their policy stance, especially as inflation remains above target levels. As the wait continues, the BOJ's decision rests on the outcome of Spring wage negotiations, which will provide insights into the strength of domestic demand and wage growth.

The ongoing debate surrounding the BOJ's monetary policy highlights the delicate balance it faces in stimulating sustainable economic growth while ensuring price stability. The central bank's response to inflationary pressures and wage negotiations will be crucial in determining the direction of Japan's monetary policy in the coming months.