JPY: June hike prospects support currency – ING

ING's Senior Economist Min Joo Kang argues that stronger Japan GDP data and resilient private spending support continued Bank of Japan (BoJ) policy normalisation, with a rate hike more likely in June than April. Limited gasoline price pressures and government energy measures give the BoJ time to monitor wage growth, Shunto outcomes and April inflation before deciding on the next move.

BoJ seen delaying next hike to June

"Japan’s GDP expanded more than expected in the last quarter of 2025, and household spending on goods and private services remains on track in January. With retail gasoline prices contained, the Bank of Japan is likely to delay any rate hike to June, standing pat in April."

"Government spending is expected to rise in the current quarter, while energy subsidies and strong wage growth are set to boost private consumption. Inventory was a drag on growth for the second straight quarter. But we expect the restocking cycle to reverse and begin contributing positively to the current quarter."

"Despite the soft headline, underlying spending on goods and private services still seems resilient. Combined with solid wage data (real wage growth of a 1.4% YoY in January) from yesterday, recent trends support our view that private spending is expected to remain firm in the current quarter."

"Combining all these factors, the Bank of Japan will likely continue its policy normalisation."

"More importantly, tracking April inflation, especially service prices, will be quite important as companies tend to adjust their prices in the first month of the fiscal year."

"Overall, the probability of a rate hike in April is likely to rise if initial Shunto results exceed expectations. Additionally, we will pay close attention to comments from BoJ officials, as their communications often provide indications regarding potential rate hikes ahead of policy meetings."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)