DBS Group Research economist Ma Tieying expects the Bank of Japan (BoJ) to raise rates by 25bps at its 17–18 September meeting, citing firm economic, wage and inflation conditions. Final second-quarter GDP showed growth running at 1.4% QoQ on a saar basis, or 0.9% YoY, while July wages rose, with total pay up 4.7% YoY and base wages up 4.1% YoY. She also points to underlying inflation measures converging on the BoJ’s 2% target.
Expected Rate Hike and Supporting Economic Data
Final second-quarter GDP showed growth running at 1.4% QoQ on a saar basis, or 0.9% YoY, while July wages rose, with total pay up 4.7% YoY and base wages up 4.1% YoY. She also points to underlying inflation measures converging on the BoJ’s 2% target.
Policy Outlook and Market Risks
In that context, the likely outcome is a hawkish 25bps increase paired with guidance that keeps the pace of future moves flexible. A 50bps step, or a sequence of back-to-back hikes at each meeting, is presented as less probable. The text adds that large policy surprises risk reviving Japanese Yen (JPY) carry-trade unwinding, referencing an unexpected move in July 2024 that led to a sharp unwind and broader market jitters.
