Goldman Sachs Sees BOJ Rate Hike as Certainty with Faster Tightening Ahead
Goldman Sachs believes that the Bank of Japan's upcoming rate hike is almost certain to happen, and may even be followed by another increase in December. The bank points to several factors that could push inflation higher, including rising energy prices, strong demand for AI-related products, a weaker yen, and accommodative financial conditions.
The bank notes that the current low real yields on Japanese government bonds look out of sync with the country's robust domestic fundamentals. Goldman expects fiscal policy to remain accommodative under Prime Minister Takaichi, which will put further upward pressure on inflation.
A faster hiking path would support the yen by narrowing Japan's yield gap with other major economies and making Japanese assets more attractive for carry-trade unwinds. However, this could weigh on the earnings outlook for Japan's large exporter base.