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STIR: BOJ Dated OIS Firmer Than Pre-Dec MPM Levels

STIR
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BoJ-dated OIS pricing has shifted significantly since mid-January, following remarks by Deputy Governor Ryozo Himino on January 14. Himino stated, “At the monetary policy meeting to be held next week, the board will discuss whether to raise the policy rate or not.” He also highlighted the momentum of domestic wage growth and the potential impact of U.S. President-elect Donald Trump’s policies.

  • Governor Ueda reinforced this sentiment the following day in a speech to the Regional Banks Association of Japan, further fueling expectations of a policy shift.
  • Additionally, comments from Economic Revitalization Minister Ryosei Akazawa on January 14 and Finance Minister Katsunobu Kato the day after signaled support for a potential rate hike. Both ministers indicated they had no intention of opposing a January increase, strengthening the perception that a hike is imminent.
  • Policymakers, including Governor Kazuo Ueda and the two deputy governors, will form their final view after monitoring market moves and their background on Friday, MNI believes.
  • Current OIS pricing is flat to 8bps firmer than pre-December MPM (Monetary Policy Meeting) levels, with January leading.
  • Market expectations currently indicate: a 94% probability of a 25bp hike in January; a cumulative 96% chance by March; and a full 25bp increase by May 2025.

 

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BoJ-dated OIS pricing has shifted significantly since mid-January, following remarks by Deputy Governor Ryozo Himino on January 14. Himino stated, “At the monetary policy meeting to be held next week, the board will discuss whether to raise the policy rate or not.” He also highlighted the momentum of domestic wage growth and the potential impact of U.S. President-elect Donald Trump’s policies.

  • Governor Ueda reinforced this sentiment the following day in a speech to the Regional Banks Association of Japan, further fueling expectations of a policy shift.
  • Additionally, comments from Economic Revitalization Minister Ryosei Akazawa on January 14 and Finance Minister Katsunobu Kato the day after signaled support for a potential rate hike. Both ministers indicated they had no intention of opposing a January increase, strengthening the perception that a hike is imminent.
  • Policymakers, including Governor Kazuo Ueda and the two deputy governors, will form their final view after monitoring market moves and their background on Friday, MNI believes.
  • Current OIS pricing is flat to 8bps firmer than pre-December MPM (Monetary Policy Meeting) levels, with January leading.
  • Market expectations currently indicate: a 94% probability of a 25bp hike in January; a cumulative 96% chance by March; and a full 25bp increase by May 2025.

 

Keep reading...Show less