Institutional Outlook on Bank of Japan Meeting: Rate Hike on the Table but Yen's Decline Unstoppable, Halt in Bond Purchase Reduction May Be Considered

BlockBeats News, June 16th. In anticipation of the upcoming Bank of Japan monetary policy meeting, the market is highly convinced of a rate hike. Some institutions believe that the Bank of Japan will also conduct a mid-term assessment of its bond-buying reduction plan at this meeting. Here is a summary of views from major institutions:

Goldman Sachs: It is expected that the Bank of Japan will raise interest rates at this meeting, aligning with consensus and market pricing. The central bank is likely to maintain a pace of approximately one rate hike every six months thereafter.

Mitsubishi UFJ: The Bank of Japan is expected to raise interest rates this week, with another hike later in the year. Since the market has fully priced in the 25 basis point hike, this move alone is unlikely to reverse the yen depreciation trend.

Kiyotaka Sakaue, Former Chief Economist of the Bank of Japan: It is expected that the Bank of Japan will raise interest rates at this meeting. The peace agreement between the U.S. and Iran is not expected to change the central bank's two rate hikes expected for this year. Deputy Governor Shinichi Uchida is likely to reaffirm the central bank's determination to continue raising rates but will avoid giving a clear indication of the timing of the next rate hike.

QT Expectations:

Mizuho Bank: It is expected that the Bank of Japan will conduct a mid-term assessment of its bond-buying reduction plan at this meeting. The current reduction plan is likely to be maintained unchanged between January and March next year; the reduction in monthly bond purchases may pause or slow down between April and June and beyond.

Deutsche Securities: If the Bank of Japan decides to halt the reduction in monthly bond purchases, it must provide sufficient explanation. If the Bank of Japan decides to raise interest rates and stop reducing bond purchases simultaneously, regardless of the true intent, the market and the public may interpret it as a "political deal" reached with the government.

If the Bank of Japan stops reducing the monthly bond purchase size, the impact on liquidity and the overall market is expected to be neutral to mildly positive, particularly in avoiding a sharp tightening of liquidity.