BoJ Leans Toward Gradual Tightening as Neutral Rate Debate Continues – ING
ING analysts see the Bank of Japan holding a tightening bias after its June rate adjustment, with most board members assessing the neutral rate at a level that points to further hikes.
ING’s Chris Turner and Padhraic Garvey expect the Bank of Japan to maintain its policy-tightening stance following the June decision that lifted the key rate to 1.00%. Their note highlights that a majority of the BoJ board now views Japan’s neutral rate as being close to that level, fueling debate over the speed and scope of additional hikes.
This shift keeps upward pressure on short-term JGB yields and narrows the rate gap with the U.S., lending support to the yen. Markets are pricing a gradual, data-dependent path, with the terminal rate likely to land above 1% if the neutral estimate holds.
The analysts caution that while the BoJ’s rhetoric is increasingly hawkish, any signs of economic softness or a global downturn could slow the tightening cycle.
Source: FXStreet Forex News