Bank of Japan: Hawkish hike prospects grow – DBS

DBS Group Research analysts Taimur Baig and Chang Wei Liang expect the Bank of Japan (BoJ) to hike rates by 25 bps at its September 17–18 meeting, citing solid Gross Domestic Product (GDP) growth, stronger wages and inflation near the 2% target. They see a hawkish tone but rules out a 50 bps move or back‑to‑back hikes as the base case.

BoJ seen delivering hawkish 25 bps hike

"It is almost a done deal that the Bank of Japan will hike rates at the upcoming meeting on Sep 17-18."

"The most likely outcome is for the BOJ to deliver a hawkish 25bps hike while signalling a flexible pace of rate hikes at future meetings."

"An outsized 50bps hike at this meeting or back-to-back rate hikes at every meeting is not our base case."

"More importantly, the BOJ should remain mindful of the market impact of large policy surprises, given that the unexpected rate hike in July 2024 triggered a massive JPY carry-trade unwinding and jitters across global financial markets."

"Final 2Q GDP confirmed that the economy continued to grow at an on-trend pace of 1.4% QoQ saar, or 0.9% YoY, in 2Q."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)