📝We Believe The BoJ Will Adjust Policy In January: ING Strategy

We still believe that January is the likely time for the BoJ to begin its policy adjustment - scrapping the yield curve control. Governor Ueda mentioned that there is not much new data before the January meeting, thus the option of a rate hike won't be on the table. But in January, the Bank of Japan will release its latest macro outlook report and we assume the CPI inflation outlook will be revised up for 2024 and 2025 above 2%. Also, thanks to the US Treasury rally, the 10-year JGB yield should stay below the current reference rate of 1%. These conditions will likely justify the change in the yield curve control policy. In March, the Bank of Japan won't like to deliver any policy changes as it coincides with the end of the fiscal

The first rate hike will come sometime after in the second quarter. By then, the BoJ's policy review will be complete and the BoJ will have more evidence of sustainable inflation and solid wage growth after the spring wage negotiation season. But the market will likely anticipate any such a move ahead of time, thus the volatility of the yen and rates markets is expected to be high early next year.

-ING Strategy