The Summary of Opinions for the June MPM suggested that the BoJ delayed additional policy rate hikes as it would like to wait for confirmation from the data. Meanwhile, there is a strong intention to reduce JGB purchase amounts, OCBC Rates Strategist Frances Cheung notes.

BoJ to continue further monetary tightening

“The BoJ said ‘any change in the policy interest rate should be considered only after economic indicators confirm.’ And ‘it is difficult to say at this time that the results of this year’s annual spring labour-management wage negotiations have been reflected in wage statistics.’

“The base-case shall still be for further monetary tightening, as the BoJ continues to see ‘steady progress has been made toward achieving the prices stability target’; and if their outlook materializes, ‘the Bank will raise the policy interest rate and adjust the degree of monetary accommodation.”

“On balance, we expect the policy rate to be hiked to 0.2-0.3% by year-end. In terms of balance sheet policy, the Summary of Opinions commented ‘it is appropriate for the Bank to make a sizeable reduction in the purchase amount [of JGBs] in a predictable manner.”