The Bank of Japan will hold a monetary policy meeting from the 18th to the 19th, and the 9 members of the Monetary Policy Committee will review whether to raise interest rates again. The short-term economic outlook (short-term outlook) survey released on the 13th showed that the confidence of Japan's large manufacturers has improved, reaching a new high in nearly 3 years, and exceeding market expectations, which is expected to provide support for the Bank of Japan's interest rate hike.
Possible Delay of Rate Hike in December
However, according to a report by Nikkei News, given the continued high uncertainty over the outlook for Trump's economic policies, the Bank of Japan will carefully evaluate the situation, including domestic wage and price developments, and the meeting this month may remain unchanged, delaying further rate hikes. The Bank of Japan has kept interest rates unchanged in September and October since raising them to 0.25% in July.
A person familiar with the Bank of Japan said that the economic trends in Japan are in line with expectations, the core CPI in Japan has reached above 2% for 31 consecutive months, and real wages excluding the impact of prices have escaped the contraction of the previous 3 months, but there are still voices within the Bank of Japan that are not in a hurry to raise interest rates and still have time to further confirm the outlook for US economic policies.
The Federal Reserve will announce its latest interest rate decision in the early morning of Taiwan time on the 19th, and is expected to cut rates by 1 notch. A person familiar with the Bank of Japan mentioned that they hope to understand the Fed Chairman Powell's views on future rate cuts from his remarks.
Bank of Japan Governor Kazuo Ueda said at the end of last month that as economic data develops in line with the Bank of Japan's forecast, the timing of further rate hikes is "approaching", but he did not explicitly support a rate hike in December, emphasizing that wage trends will be the key to policy decisions.
Ueda mentioned at the time that recent wage growth is around 2.5% to 3%, roughly in line with the long-term inflation growth rate of 2%, but the key is whether this trend can be sustained, so the spring wage negotiations between labor and management next year will be crucial.
Over Half of Analysts Expect Rate Hike in January 2024
A Bloomberg survey showed that among the 52 economists surveyed, 44% expect a rate hike this week, while 52% expect a rate hike next month. Looking at overnight index swaps, the probability of a rate hike this week is only 15%, significantly lower than the 66% at the end of November, indicating that the market sees little urgency for a rate hike this week.
As the Bank of Japan is likely to keep rates unchanged this week, the yen has continued to weaken, with the USD/JPY exchange rate currently at 153.83, the lowest level since November 24. With Japan expected to raise rates only in January 2024 and the continued long-term uncertainty about US inflation, the room for yen carry trades is expected to continue, and the cryptocurrency market may continue to have upside potential in the short term.
