Barclays Sticks to October Rate Hike Forecast for Bank of Japan

Barclays is sticking to its forecast of a rate hike in October from the Bank of Japan, despite the central bank's increased vigilance around inflation. In July, Governor Ueda signaled that the BoJ could accelerate its pace of rate hikes if underlying inflation overshoots 2%. The firm says this means additional information on medium- to long-term inflation expectations and financial conditions is needed before proceeding with the next hike.

The BoJ's July meeting strengthened its vigilance around the risk of underlying inflation overshooting 2%, citing two conditions that could justify a faster pace of tightening. These include excessively accommodative financial conditions or the risk of underlying inflation overshooting 2% becoming more likely to materialize. Barclays says these developments suggest the BoJ still requires additional information before proceeding with its next rate hike.