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DBS expects BoJ rate hike at September 17-18 meeting
The bank warns an outsized BoJ surprise could revive yen carry-trade unwind and add volatility to JPY markets.
DBS Group Research economist Ma Tieying expects the Bank of Japan to raise interest rates by 25 bps at its September 17 to 18 meeting, calling a hike almost certain based on recent growth, wage, and inflation data.
In support of its view, FXStreet notes that DBS points to second-quarter GDP that continued to grow at an on-trend pace of 1.4% QoQ saar, or 0.9% YoY, along with July wage gains, where total wages rose 4.7% YoY and base wages increased 4.1% YoY.
DBS also argues that underlying inflation measures have converged with the BoJ's 2% price target, and it views a 50 bps move or back-to-back hikes as unlikely.
FXStreet reports DBS cautioned that an outsized rate surprise could trigger renewed yen carry-trade unwinding, raising the risk of renewed market volatility.