Bank of Japan: Outsized hike risks carry shock – DBS
DBS Group Research economist Ma Tieying expects the Bank of Japan (BoJ) to raise rates by 25bps at its September 17–18 meeting, describing a hike as almost certain given solid Gross Domestic Product (GDP), wage and inflation data.
The central bank's decision to raise interest rates by 25 basis points at its upcoming meeting on September 17-18 is widely anticipated by DBS Group Research economist Ma Tieying. Recent economic indicators, including strong GDP growth, rising wages, and improving underlying inflation, support the case for a rate hike. Ma cautions that a more substantial 50 basis point increase or consecutive hikes are not expected, warning that such drastic moves could lead to renewed yen carry-trade unwinding and market volatility.
The BoJ is likely to adopt a hawkish stance with the 25bps hike, signaling a flexible approach to future rate decisions. However, the potential impact of large policy surprises on the market should not be overlooked, particularly given the significant JPY carry-trade unwinding triggered by the unexpected rate hike in July 2024.
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