Boj Rate Hike Signal Sends Yields Higher

 Boj Rate Hike Signal Sends Yields Higher

Bank Of Japan (Boj) Rate Hike Signal Sends Yields Higher

According to Kazuo Ueda (BoJ Governor), a jump in inflation will happen starting from summer 2024 through the autumn season.

He added that the recent pay hikes are 'bumper' when compared with the past. This will increase domestic spending, which means a jump in prices (inflation) as well. Given these circumstances, he hinted at the possibility of another rate in the next few months.

Jpy Recovers From 34 Year Lows

The mention of a rate hike in the short term was taken positively by the Japanese government bond yields. As a result, the Japanese bond yields are now sitting at historic highs while the Japanese Yen (JPY) is recovering from its 34-year low.

The upside seen in the Japanese Yen (JPY) will be taken positively by the authorities as they were worried about the currency's weakness against other G10 economies.

In a recent interview, the BoJ governor also added that they will respond to data with monetary policy. So, the next rate hike could be affected by the JPY value, wages, and inflation.

He added that the bank has finally ended its negative interest rates and even a major stimulus programme. This was only done after confirmation that inflation is well on its way near the 2% target. So, if the BoJ becomes more confident in terms of data, that will also be a reason for a rate hike very soon.

If we read through the governor's interview, it becomes clear that the 2% inflation target is now a high probability. Just a few days earlier, the finance minister of Japan also talked about possible interventions in case of major falls in the Japanese yen (JPY).

After the comments, the Japanese yen refreshed its weekly highs along with the 2-year bond yields, which are now at 0.21% (the highest point in the last 13 years). The overall mood of the Japanese bond and currency market is now mostly positive after the exit from negative rates.

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