Via Scotia, Preview Comments on What to Expect from the Bank of Japan.
Of the 46 consensus forecasters, only 9 expect a rate hike.
Markets are pricing in a 10 basis point rate hike, which has been around 70% with pricing around 7 basis points.
The argument for raising interest rates rests entirely on measuring the degree of confidence the Bank of Japan has that it is on track to achieve 2% inflation over the medium term while moving further away from the distorted near-zero interest rate of 10 basis points.
I’m not sure they should have such confidence.
- Tokyo’s core CPI just eased from the previous advance towards more stable readings, sending a cautious signal.
- The yen has risen sharply in a very short period of time.
- There is little evidence that Japan is escaping the grip of falling real wages.
- While Shunto’s annual rounds of negotiations with unions have led to a sharp acceleration in wage growth over the past two years, this has had a concentrated effect on less than 20% of Japanese workers, and evidence that this extends to higher wages elsewhere is very limited.
- Oil prices have fallen somewhat recently, but more importantly they have generally been trending sideways for most of the year; and since Japan imports a lot, the risk of inflation has receded.
Bank of Japan
The Bank of Japan is scheduled to meet today and tomorrow, with the statement expected to be released sometime between 02:30 and 03:30 GMT on Wednesday, July 31, 2024.
- This is 2230 – 2330 EST on Tuesday, July 30, 2024.
Bank of Japan Governor Ueda continues press conference at 0630 GMT (0230 ET).
