The window of opportunity is closing for the BOJ to hike rates again


The latest report here today continues to exemplify the notion above. Even before their decision in March, the BOJ was already facing a race against the clock after having already sat on its hands throughout the whole of last year.

They wanted to wait on the spring wage negotiations to confirm their conviction. And in some sense, it makes sense to sync the cycle of prices and wages. But in hindsight, they could’ve already done that in 2023. Now, the window of opportunity for the BOJ is definitely closing as they chase their next move:

Japan nationwide core CPI year-on-year (%)

The declining trend in prices is likely to also be confirmed by the BOJ’s own measures next week.

While there might still be room to squeeze in one more rate hike in July or September at the latest, it is looking to be a case of that being the last one for the Japanese central bank.

That unless we do get stronger second-round effects on inflation. That particular dynamic seems to be stronger elsewhere around the globe though. In Japan, policymakers might not get that slice of fortune amid the country’s economic and demographic evolution in the last two decades.

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