BoJ Rate Hike Expected, But Hawkish Signal Needed

The Bank of Japan's (BoJ) upcoming policy announcement is a crucial event for markets on Friday, with expectations of a rate hike to 1.25% from 1.0%. Danske Bank predicts this move will be in line with consensus and has already been largely priced in by investors.

Rabobank agrees that the market expects a rate hike, but warns that Governor Ueda needs to signal a more hawkish approach to tightening to maintain the yen's recent improved tone. This could involve an accelerated pace of policy tightening.

The BoJ decision comes after the US Federal Reserve hiked rates by 25 basis points to between 3.75% and 4.00%, marking its first hike since 2023. The UK's Bank of England also held interest rates at 3.75% on Thursday, with a majority vote to keep rates on hold.