BUZZ-COMMENT-Pathway to a BoJ January hike

Reuters2024-12-20

Dec 20 (Reuters) - Bank of Japan Governor Kazuo Ueda’s stance at the post-decision conference was surprisingly non-committal over near-term policy tightening. The resulting price action was a sizeable squeeze higher in cross-JPY, which has since prompted Japanese officials to vocalise their concerns over the recent moves.

Ueda did appear to open the door to delaying a hike as far out as May after stating that the "large picture on wage trends will become clearer in March, April". Though this may be more of a case of not cornering themselves by strongly committing to a January hike and instead leaving some optionality on the table. Keep in mind that there is a potential for significant changes in U.S. fiscal policy from late January.

Regarding a hike at the next meeting, the governor did highlight that they would have access to the January Branch Manager meeting, adding that they need “one more notch” of the data they have been seeing in recent months. The table below shows the list of key data points between now and the January policy meeting with two key speeches from Governor Ueda on Dec. 25 and Deputy Governor Himino on Jan. 14.

While doubts over a near-term hike have risen, the base case remains for further policy normalisation at the January meeting.

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(Justin McQueen is a Reuters market analyst. The views expressed are his own.)

((justin.mcqueen@thomsonreuters.com))

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