BOJ Rate Hike Odds Rise as Japan's Revised Q2 GDP Looms

The Bank of Japan's upcoming rate hike decision on September 17-18 has become increasingly likely, with markets pricing in an 80% chance of a hike. The upcoming release of Japan's revised Q2 GDP data will be a crucial test for BOJ policy makers.

According to preliminary figures released in mid-August, the economy expanded at an annualized rate of 1.1%, below the 2% consensus forecast. However, corporate capex and profit survey data released last week show that firms are lifting spending more than initially thought, which could lead to an upward revision in the GDP figure.

A stronger GDP revision would reinforce the case for a BOJ rate hike, as it would demonstrate that the economy can absorb higher borrowing costs. This could further tighten financial conditions and put pressure on rate-sensitive sectors of the Nikkei, despite exporters benefiting from a firmer growth narrative.