Bank of Japan: Market-priced hike to 1.25% – Danske Bank

Danske Research Team expects the Bank of Japan to raise its policy rate to 1.25%, a move they say is largely priced in as market expectations tightened in recent weeks. They anticipate BoJ will signal a more nimble tightening pace than its cautious cycle so far, warning that any deviation could weigh heavily on the Japanese Yen as core CPI pressures pick up.

Nimbler tightening path expected

"In Japan, the Bank of Japan will decide overnight on its policy rate."

"We expect the Bank of Japan to hike its policy rate to 1.25%. The move has largely been priced in by investors as market pricing has tightened significantly during recent weeks and we do not expect Governor Ueda to push against that."

"We expect BoJ will signal a nimbler approach to the tightening pace than the very cautious hiking cycle we have witnessed so far. Anything else will weigh heavly on the yen."

"Ahead of the meeting, fresh CPI data for August will be released. Core price pressures have shown signs of picking up a bit recently which is also what is reflected in the Tokyo data published earlier this month."