Latest Hawkish Sources Piece Re: BoJ Inflation Projections Applies Some Pressure to Futures

JGB futures moves lower, breaching 145.00 as BBG sources report that “the BoJ is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at its policy meeting later this month, extending the period in which it sees prices hitting or exceeding its 2% goal.”

• This builds on last week’s narrative from Kyodo News sources, which suggested that “the BoJ is considering raising its inflation outlook for the current business year to next March to near 3%.” Indeed, the BBG sources flagged a similar train of thought re: updates to the current FY CPI forecast.
• The lack of sustainability re: inflation at/above the BoJ’s 2% goal was a key part of the Bank’s reasoning re: the tepid pace of policy movement as other G10 central banks tightened aggressively over the last 2 years.
• The BBG sources piece calls that idea further into question, although the sources suggest that the BoJ’s inflation outlook for ’25 will remain around 1.6%. That would mean that the Bank still expects inflation to fall back below target within its forecast horizon.
• Technically, a break through session lows would allow bears to focus on the YtD lows (144.15). The contract last shows 30 ticks lower vs. settlement levels, building on the Tokyo session cheapening.