BOJ Has Room for Faster Rate Hikes Amid Rising Producer Prices and Wage Growth
The Bank of Japan has room to accelerate its rate hike cycle due to rising producer prices and strong wage growth, according to ICICI Bank Research.
In a report, the research team noted that while inflation data remained relatively benign in August, government subsidies have helped contain the impact of higher energy prices on consumers. However, producer price inflation rose 7.6 per cent in August, and goods inflation increased 2.6 per cent amid yen depreciation.
The report expects another 25 basis point rate hike in 2023, followed by at least one additional hike in 2024, taking the policy rate to 1.75 per cent. Despite this, the yen's outlook remains weak, with the report expecting USD/JPY to trade in the 157-161 range in the near term and continue to depreciate over the medium term.