Central bank week: the Bank of Japan on 30 October and the Fed's path into year-end

Separate what is known from what is not

The trading value of a rate decision comes from the expectations gap, not from the decision itself. What is already known: the Bank of Japan raised its policy rate to 1.25% on 18 September, several members have said a hike would be timely, and the market leans towards a hold on 30 October with room preserved for December. On the Fed side, the market prices a hold in October and a 25 basis point increase in December.

What is unknown is whether the BoJ's statement and press conference adopt firmer language on inflation, and whether Fed officials speaking before the blackout continue to emphasise sticky inflation. Those two areas are where the price movement comes from.

Liquidity deteriorates before the event

Two to three sessions ahead of a decision, market makers typically pull back their quotes and spreads widen. If your strategy depends on tight spreads, cut trading frequency during that window rather than adding exposure because "something is coming".

Sizing: let the distance to the event decide

An executable rule is to tie position size to the time remaining before the event. More than three sessions away, trade normal size. One to three sessions away, halve it. Within two hours either side of the release, open nothing new.

This is not about giving up opportunity; it is about removing uncertainty you cannot price from your position.

Stops: allow extra room before the event

If you must hold overnight, base the stop distance on implied volatility around the event rather than on ordinary volatility. USD/JPY has recently oscillated between 157.60 and 159.00, with daily ranges wider than usual. Using an ordinary stop distance in that environment sharply raises the probability of being taken out by noise.

After the event

The first move after a decision often contains a large emotional component. The more robust approach is to let the first hour pass, see whether price returns to the pre-statement range, and only then judge whether the direction has genuinely changed. If price comes back inside the range, the market is not reading the statement uniformly. Only a sustained move outside the range justifies revisiting your assumptions.