According to individuals with knowledge of the situation, Bank of Japan officials are leaning against an uncommon back-to-back interest rate increase this month, while still considering the possibility of another move as early as December.

The sources stated that BOJ officials see little necessity for consecutive rate increases without evidence that upside inflation risks will suddenly intensify. Instead, the central bank will meticulously analyze economic data to determine if another increase is justified as early as the December meeting, the sources added.

The final policy decision at the October 30 meeting could still be altered until the very last moment, the sources noted.

Governor Kazuo Ueda's board raised borrowing costs to 1.25% last month as it sought to stay ahead of upside inflation risks. The action also occurred amid pressure from Treasury Secretary Scott Bessent to continue normalizing policy and help bolster the yen.

The yen was trading around 158.05 per dollar late Tuesday afternoon in Tokyo, weaker compared to approximately 155.87 hours before the BOJ raised borrowing costs by a quarter-point on September 18.

The September rate increase was the second in three months, marking the fastest pace of increases since 1990. Ueda stated that the move was justified as the BOJ shifted to a new policy phase with greater emphasis on upside price risks. Nevertheless, the BOJ has not raised rates in consecutive months since 1980, indicating a strong preference for evaluating the impact of policy actions before proceeding again.

Pricing in the overnight swaps market indicates that traders are assigning a roughly 10% probability of an increase this month, with the likelihood rising to 88% for a move by December. About one-third of economists surveyed last month forecast a move in December, while more than half predicted the BOJ would wait until January.

Japan's economy and inflation have been progressing largely in line with the BOJ's projections, the sources said. The price trend is anticipated to align with the 2% target sometime within the next 18 months.

While underlying inflation can finally be assessed as being around 2%, more than a decade after the target was established in 2013, that does not mean the bank's mission is complete. The objective is not merely to reach 2%, but to ensure inflation stabilizes around that level, the sources said.

BOJ's Ueda commented on that point Tuesday, stating it was crucial to stabilize the price trend around 2%, during remarks he made in parliament.

With underlying inflation near the bank's target, the BOJ will continue seeking the appropriate timing for another rate increase while assessing the effects of its increases thus far, the sources said.

The bank will publish a new quarterly economic outlook alongside its policy statement. Officials will consider the impact of elevated oil prices and whether the bank needs to incorporate a pending temporary reduction in sales tax on food into their forecasts, according to the sources.