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ING expects Bank of Japan to keep tightening bias after 1.00% move
ING says a BoJ rate change beyond an unchanged 1.00% would be a surprise, with markets focused on voting patterns and Governor Kazuo Ueda’s guidance.
ING analysts Chris Turner and Padhraic Garvey expect the Bank of Japan to maintain its tightening bias after its June move, which set the policy rate at 1.00%. They note that most BoJ board members view Japan’s neutral rate as being closer to 2.00%.
While some officials could prefer an earlier hike in September or October, ING’s base case is that the upcoming BoJ decision will leave policy unchanged. The firm said markets will be watching how board members vote and what Governor Kazuo Ueda signals in his guidance.
FXStreet Insights highlighted that the BoJ’s recent FX intervention, which ING described as ineffective earlier in the year, has contributed to speculation that the BoJ could accelerate its tightening cycle. ING points to a belief among board members that the speed of moving toward the neutral rate is the key question.
ING also said Governor Ueda is expected back after a recent illness, with the Policy Board returning to nine members. It flagged whether any of the board’s hawks support back to back hikes, and said Ueda’s press conference would matter most unless he hints at a faster tightening path.