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Mizuho expects Bank of Japan to accelerate rate hikes
Mizuho Markets head Kenji Koshimizu said Japan’s policy rate is still deeply negative after inflation, and he expects the BOJ to move to roughly once every three months from about six months now.
Mizuho Financial Group’s markets head expects the Bank of Japan to quicken the pace of interest-rate increases, with a next hike possible as soon as next month, citing the weak yen and persistent inflation pressures. Kenji Koshimizu, co-head of Mizuho’s global markets division that manages a ¥41 trillion securities portfolio, said the BOJ may also tighten the interval between policy actions.
Koshimizu added that longer-term rates are likely to keep rising after 10-year Japanese government bond yields hit a 30-year high this week. He said Mizuho will continue to limit its bond market exposure, avoiding purchases other than inflation-linked notes and bonds maturing within a year, because the portfolio’s duration is kept short to reduce interest-rate risk.
He said the chance of a rate increase in September is “quite high,” and the BOJ could shift to a three-month cadence from roughly six months currently. With Japan’s inflation around 1.6% and the policy rate at 1%, he characterized the current stance as still deeply negative in real terms.
Koshimizu also pointed to the yen, saying it has resumed sliding despite last month’s coordinated US and Japan intervention. He suggested further deterioration is linked in part to Japan’s accommodative monetary policy, and noted market expectations for a move next in September or October, with the possibility of two increases by year-end that would lift the policy rate to 1.5%, according to LiveMint Markets.