BoJ likely to raise rates as early as May if Shunto wage talk results as strong as 2024 Eamonn Sheridan Forexlive RSS Breaking News Feed

The data from Japan today showed solid economic growth:

• Japan Q4 GDP surges to +2.8% annualized (from +1.0% expected), deflator hits 2.8% – yen up

• USD/JPY traded under 152.00 after the very strong Q4 economic growth data

Akazawa is urging caution:

• Japan economy minister Akazawa is wary about the strong GDP result

ING tipping an earlier BoJ rate hike:

• Today’s results are better than the BoJ’s current GDP forecast (0.6% YoY for FY24 GDP).
• On the inflation front, headline prices are expected to jump to 4.0% YoY in January and remain at a high level of 3% for some time.
• According to a local news report, the outcome of Spring wage negotiations is likely to be as strong as last year.
• However, the main risk to our call is US President Trump’s tariff policy. Tougher-than-expected reciprocal tariffs on Japanese goods could complicate the BoJ’s growth outlook.
• But, in our view, the BoJ’s policy priority in the near term should be to contain excessive inflation. Thus, we maintain our BoJ forecast of a hike in May and October in 2025 and an additional hike in 2026.

This article was written by Eamonn Sheridan at www.forexlive.com.The data from Japan today showed solid economic growth:Japan Q4 GDP surges to +2.8% annualized (from +1.0% expected), deflator hits 2.8% – yen upUSD/JPY traded under 152.00 after the very strong Q4 economic growth dataAkazawa is urging caution:Japan economy minister Akazawa is wary about the strong GDP resultING tipping an earlier BoJ rate hike:Today’s results are better than the BoJ’s current GDP forecast (0.6% YoY for FY24 GDP). On the inflation front, headline prices are expected to jump to 4.0% YoY in January and remain at a high level of 3% for some time.According to a local news report, the outcome of Spring wage negotiations is likely to be as strong as last year.

However, the main risk to our call is US President Trump’s tariff policy. Tougher-than-expected reciprocal tariffs on Japanese goods could complicate the BoJ’s growth outlook. But, in our view, the BoJ’s policy priority in the near term should be to contain excessive inflation. Thus, we maintain our BoJ forecast of a hike in May and October in 2025 and an additional hike in 2026.

This article was written by Eamonn Sheridan at www.forexlive.com.  Read MoreCentral Banks 

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