📝Expect BoJ to Deliver 25bps Hike In June: ING

We expect GDP to remain on a recovery path, though the pace of growth should moderate in the current quarter amid energy supply disruptions. We think recent data support a Bank of Japan rate hike in June. Separate from the data, the BoJ’s board member, Junko Koeda, signalled support for raising policy rates, citing the possibility that underlying inflation may exceed 2%. She is considered a hawkish-to-neutral policymaker. Koeda didn’t cast a dissenting vote in April, but she may do so in favour of a rate hike in June.

Given three dissenting votes by board members at the previous meeting, robust activity data, rising inflationary pressures, and some hawkish comments from BoJ officials, we expect the BoJ to deliver a 25 bp hike in June.

Also, the BoJ will hold a consultation session this week with market participants on the pace of its Japanese government bond purchase operations. The feedback from the session will inform the BoJ’s review of its bond purchase plans at its June meeting. Given the recent sell-off in JGBs, we expect the pace of reduction to slow further. This may give temporary relief to the JGB markets, but it wouldn’t stop long-term JGB yields from moving higher. - ING