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BOJ: MNI BoJ Preview - Dec 2024: Pushing Further Tightening Into 2025

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EXECUTIVE SUMMARY

  • The broad consensus for the BoJ policy meeting outcome on Thursday is for no changes in policy settings.
  • Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
  • In terms of what has shifted sentiment around the likely meeting outcome, it has more reflected press articles, along with BoJ commentary, as opposed to shifts in data outcomes.
  • Our onshore policy team in Japan has also noted political considerations in terms of potentially holding fire for a near term rate hike. Media outlets have also hinted that the central bank doesn’t see an urgent need to raise interest rates in the near term, but this didn’t mean a December hike wouldn’t be considered/discussed.
  • The FOMC announces its policy decision before the BoJ tomorrow. A 25bps cut is widely expected by the Fed. A surprise hold would boost the USD and drive USD/JPY higher, which could prompt a BoJ rethink at tomorrow’s outcome.
  • Full preview here
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EXECUTIVE SUMMARY

  • The broad consensus for the BoJ policy meeting outcome on Thursday is for no changes in policy settings.
  • Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
  • In terms of what has shifted sentiment around the likely meeting outcome, it has more reflected press articles, along with BoJ commentary, as opposed to shifts in data outcomes.
  • Our onshore policy team in Japan has also noted political considerations in terms of potentially holding fire for a near term rate hike. Media outlets have also hinted that the central bank doesn’t see an urgent need to raise interest rates in the near term, but this didn’t mean a December hike wouldn’t be considered/discussed.
  • The FOMC announces its policy decision before the BoJ tomorrow. A 25bps cut is widely expected by the Fed. A surprise hold would boost the USD and drive USD/JPY higher, which could prompt a BoJ rethink at tomorrow’s outcome.
  • Full preview here