BoJ Hike Set to Boost Yen Amid Tightening Cycle

The Bank of Japan's (BoJ) upcoming meeting is expected to bring a 25bp rate hike, according to ING. This move would take the policy rate to 1.25% and align with the market's previous view that one 25bp hike would be delivered every six months.

However, the recent shift in expectations is attributed to several factors, including the US Treasury's FX intervention in late July and local Japanese data showing a 2.4% year-over-year increase in real cash earnings in July.

The BoJ has acknowledged that the real policy rate is negative and needs to be raised, with various speeches discussing the concept of a neutral rate between 1.1-2.5% in nominal terms.