BOJ Back-to-Back Hike Looms: Historic Move Could Pressure Yen Carry Trade
Rabobank's economists are warning that the Bank of Japan (BOJ) may hike interest rates for a second time, which would be a historic move. The initial 25 basis point hike has left the Japanese Yen hanging, and another increase could pressure the Yen carry trade.
The BOJ waits until the end of October to make its next decision, but former BOJ director Momma claims that another 25bps hike is a 'real possibility', albeit at just 20-30%. This would be the first back-to-back move in decades and the first monthly back-to-back since March 1980.
The report notes that a second increase could have significant implications for the Yen carry trade, which has been a major driver of market activity. The BOJ's tightening could test this trade, leaving investors wondering what will happen to their positions.