The Bank of Japan (BoJ) has increased confidence on the FY25
spring wage negotiation after discussing regional economic
developments at the branch managers’ meeting on January 9th.
While Deputy Governor Himino said at a press conference on
January 14th that many companies plan to raise wages as much
as or even more than last year, Governor Ueda echoed the
optimistic view on the next day, which has increased the
possibility of a rate hike in January.
At the same time, speculative future positions to short the Yen
have been gradually built (Chart 2). As the Fed has become less
dovish on the back of a resilient US economy, a status quo by
the BoJ could open the door for more carry trade weakening the
Yen further (Chart 3). These developments would further lift
import inflation, eroding consumers’ purchasing power.
the BoJ is unlikely to wait beyond the financial market’s reaction
to Trump’s inaugural address.
Therefore, the BoJ is expected to hike by 25 bps at the January
meeting, when the virtuous circle between inflation and
nominal wages continue to make further progress. - Natixis
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