BOJ signals January rate hike amid strong wage growth and yen speculation.
- That would seem to be a decent one-sentence summary of what’s to come from the Bank of Japan statement due on Friday, January 24, 2025
Scouring around various notes on what to expect from the BoJ and the consensus that has emerged is for a rate hike on Friday. Analysts expect the central bank to raise interest rates by 25 basis points at this meeting, reinforcing the positive cycle between rising inflation and higher nominal wages.
- The Bank of Japan (BOJ) is growing more confident about the outcome of the 2025 spring wage negotiations, reinforcing expectations for a 25-basis-point rate hike at its January meeting. The shift in sentiment follows discussions on regional economic conditions at a branch managers’ meeting on January 9, where policymakers assessed wage and inflation trends.
- Deputy Governor Himino stated on January 14 that many companies plan to increase wages as much as or more than last year, signaling strong labor market momentum. The following day, Governor Ueda echoed this optimism, further raising the likelihood of a policy tightening move this month.
- At the same time, speculative positioning against the Japanese yen has been gradually increasing. With the Federal Reserve turning less dovish due to the resilience of the U.S. economy, a decision by the BOJ to hold rates steady could trigger further yen weakness, fueling carry trades and increasing import-driven inflation, which risks eroding consumer purchasing power.
The BOJ is unlikely to delay action, particularly given market reactions to Donald Trump’s first few days.
