BoJ may raise rates again in December, even if inflation trends sideways: Nomura By Investing.com

Investing.com — The Bank of Japan is likely to raise interest rates again in December, Nomura expected, even if inflation will trend sideways as the once sleepy central bank appears eager to move further away from its accommodative stance.

“We still see the December policy meeting as the most likely date for the next interest rate hike,” Nomura said. A rise in December, which would mark the third July, could happen even if inflation does not accelerate, as the BoJ’s July summary of views signaled a shift among central bank policymakers.

Policymakers are still watching monetary policy conditions even after July’s 0.25% rise, and despite expectations that core inflation will trend sideways at a rate of more or less than 2% year-on-year, Nomura said.

“(This) suggests to us a shift in its policy response function so that it is likely to raise interest rates even if inflation is trending sideways without rising,” it added.

While recent market volatility forced BoJ Deputy Governor Shinichi Uchida, in a speech on August 7, to emphasize that rate hikes are not on a set path and would depend on economic data and inflation, the BoJ deputy head notes that no “rule out the possibility that the BOJ will raise interest rates if stability returns to financial markets,” Nomura added.

Others, however, are not so sure that policymakers are keen to raise rates and should wait for further evidence of price pressures, likely driven by wage increases.

Looking at the summary of views from July’s monetary policy meeting, there was “only one view” that could be categorized as hawkish, Barclays said in a note on Wednesday. “Otherwise, there was some bias against rate hikes, and even among the comments supporting them, cautious remarks stood out,” it added.

The BoJ will likely have to wait at least until its December meeting to confirm “that the next wave of service price hikes is reflected in national CPI data”, Barclays said, although it now expects the BoJ’s next rate hike in January and not April. expectations that wage pressures will move the inflation needle.

The new year will provide a clearer perspective on the annually negotiated wage increases, or “shunto”, which are likely to be reflected in macro wage data, Barclays added.