Japan's Economic Recovery Sets Stage for Faster BOJ Hikes

Dow Jones
Sep 11

0301 GMT - Japan's economy growing above potential will require faster rate hikes to prevent overheating, TD Securities analysts say. As the economy turns a corner, TD says the BOJ can't risk falling behind, forecasting that it will ditch gradual tightening. Price pressures are also accelerating and the labor market is set to tighten more. Against that backdrop, TD calls for a hike roughly once a quarter, departing from the BOJ's usual semi-annual cadence. It projects 25bp hikes next week and in December, followed by similar hikes at the April, July & October 2027 meetings, taking the target rate to 2.25%. An important consideration for the BOJ's path will be fiscal policy, with expansion bringing forward rate hikes or extending the tightening cycle into 2028, TD says.

 

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