Comment: Earlier BoJ hike cannot be ruled out
26/03/2025 10:34
March 26 (Reuters) - Since the Bank of Japan's March policy meeting, there has been a steady increase in the probability attached to a rate hike happening sooner rather than later. As previously mentioned, the pricing for the May meeting looked to be on the low side at around 16%, and this is now up to 28% 0#JPYIRPR. With more details expected on this year’s pay rises from Japan’s largest trade union group, Rengo, and another set of inflation figures ahead of the May meeting, there is room for a further hawkish repricing. In turn, despite the recent seasonality-induced weakening in the yen, which has taken out 150 against the dollar, a hawkish repricing in Japanese rates should limit further yen downside from current levels. Junko Koeda, in her first speech since joining the BoJ, said on Wednesday that various indicators show Japan’s underlying inflation is moving towards target, adding that Japan’s real interest rate is currently extremely low. It is noteworthy that Koeda is of a more hawkish disposition and with this in mind, there is a likely less resistance on the board to a potential faster pace of rate hikes. Therefore while the consensus leans towards a July hike, a rate hike at either of the May or June meetings should not be ruled out. For more click on FXBUZ BOJ pricing https://tmsnrt.rs/3QOfFST (Justin McQueen is a Reuters market analyst. The views expressed are his own.) ((justin.mcqueen@thomsonreuters.com))