BlackRock's Research Arm Recommends Underweighting Japanese Government Bonds, Anticipates Further BOJ Rate Hikes

BlackRock's research arm indicated that the Bank of Japan's current focus is on preventing inflation from becoming significantly too high. Ben Powell, Chief Investment Strategist for the Middle East and Asia Pacific at BlackRock Investment Institute, recommended an "underweight position in Japanese Government Bonds." He stated that the prospect of further interest rate hikes by the Bank of Japan, rising global term premiums, and substantial bond issuance could continue to push Japanese government bond yields higher. BlackRock's analysis suggests that strong wage growth and rising core inflation further reinforce its view that a "gradual normalization" of monetary policy remains on track. The firm maintains a neutral outlook on Japanese equities, pointing out that Japan's reliance on imported energy could potentially offset the positive impacts from healthy corporate balance sheets and corporate governance reforms.