Japanese orthotics to help BOJ raise prices faster
By playing Kihara
Tokyo (Reuters) – Hawkish’s comments from the Bank of Japan and sticky inflation have lifted bond yields to multi-year highs, raising expectations for advancement rates, and have not risen much in an economy that is historically prone to deflation. Sways your view.
Mitsubishi UFJ Morgan Stanley Securities said on Monday that it expects BOJ to raise its July interest rate to 0.75% from the current 0.5% instead of October-December.
It also advanced the timing of subsequent hikes from the last quarter of the year until January 2026, pointing to an increasing number of indications that price pressure would continue.
Former Boj official Nobuyasu Atago sees the opportunity to hike at the April 30th and May 1st meeting, given Boj’s growing attention to the risk of inflation overshooting.
“BOJ’s next rate hike could soon be unexpected. The market is probably starting to price it,” he said, adding that it has risen in recent Japanese bond yields.
The Japanese government’s bond yields rose as it reconsidered its view that the market would not push the rates above 1%. The lower end of staff will have Japan’s nominal neutrality rates in the range of 1% to 2.5%.
The benchmark 10-year yield rose 2.5 basis points to 1.375% on Monday, reaching its highest level since 2010. The five-year yield also rose 3.5 points to 1.040%.
Japan’s solid October-December GDP data on Monday, coupled with recent strong inflation, boosted Yen and bond yields by solidifying expectations for a short-term interest rate hike.
BOJ Board Member Hajime Takata’s Wednesday speech and press conference will be further scrutinized by the market for clues regarding the timing and pace of the price hike.
The BOJ has shown that it is ready to hike further with the view that it has increased its short-term rate to 0.5% in January, and that the economy is progressing enough to withstand the 2% inflation target.
The quarterly report issued on January 24th included an analysis of how chronic labor shortages have led to increased wage-driven inflation.
A week later, BOJ Vice Governor Ryozo Himino said it was “not normal” for Japan to remain negative if true interest rates are too long. Tamura, a member of the board, also said earlier this month that the BOJ must raise the fee to at least 1% by early 2026.
Hawkish’s BOJ signal led the market to price with an approximately 80% chance of a price increase of about 80% to 0.75% in July. Private sector surveys showed that most economists are projecting their next hikes when they arrive later this year.