Japanese Yen: December hike odds gain support from BoJ outlook – BBH

A policy rate of 1.25% is expected to remain in place as the Bank of Japan (BoJ) assesses September’s increase before resuming tightening, according to Brown Brothers Harriman’s (BBH) Elias Haddad. With underlying inflation firmer, the Outlook Report could take a more hawkish tone. Swaps indicate a high probability of an increase to 1.50% in December, and the change in rate expectations is viewed as supportive of the Japanese Yen (JPY).

BoJ expected to hold as hawkish rate expectations strengthen

"The BoJ is widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again."

"In September, BoJ Governor Kazuo Ueda warned that rapid rate hikes could unsettle asset prices, adding that it could take some time to confirm that 2% inflation is entrenched."

"Still, firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY."

"The swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months."

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