The Bank of Japan is showing flexibility to accelerate the pace of interest rate hikes beyond market expectations of roughly once every six months, according to interviews with multiple sources. The BOJ recognizes that the underlying inflation rate is approaching its 2 percent price stability target quite closely, and is at a critical juncture to further scrutinize upside risks. It views the recent yen depreciation as potentially posing additional upside risks to prices through corporate cost pass-through, and some sources pointed to the possibility of a faster pace of rate hikes than before. The interest rate swap market is pricing in a roughly 24 percent probability of a hike by the September meeting, about 73 percent by the October meeting, and near 100 percent within the year.
Bank of JapanBOJ is considering faster rate hikes, indicating confidence in inflation target
BOJ may accelerate rate hikes, strengthening JPY against USD