BoJ Hike Odds Rise Amid Inflation Fears and Fiscal Concerns
The Bank of Japan's (BoJ) policy meeting in September is expected to bring significant changes, with markets pricing in a roughly 50% chance of a 25bp hike and a full hike by year-end. According to BNY's Wee Khoon Chong, long-end JGB yields are rising due to inflation and fiscal concerns, pushing them toward the upper end of recent ranges.
Chong highlights that several members of the BoJ debated whether to keep the policy rate unchanged at this meeting or assess the lagged impact of the previous hike. However, the overall tone favors further tightening, with risks of larger hikes if action is delayed.
The debate has shifted from lifting inflation to 2% to preventing an overshoot, with members warning that waiting too long could force faster and larger rate hikes later, risking a 'double shock.'