The Bank of Japan is increasingly likely to deliver a hawkish 25 basis point rate hike at its September 17-18 policy meeting, according to DBS Group Research analysts Taimur Baig and Chang Wei Liang. The analysts point to robust GDP growth, strengthening wage data, and inflation hovering near the central bank’s 2% target as key drivers behind the expected tightening move.
This comes as Japan continues its historic shift away from ultra-loose monetary policy that dominated for decades. A rate increase would mark further normalization of Japanese monetary policy and could significantly impact currency markets, particularly the yen which has been volatile amid shifting BOJ policy expectations. Traders holding yen positions should prepare for potential volatility as the meeting approaches, while global equity markets may see ripple effects given Japan’s economic significance.
FXnCO Insight
Currency traders should monitor USD/JPY closely ahead of September 18, as a confirmed hawkish hike could trigger sharp yen strengthening and unwinding of carry trades.
Source: FXStreet