We had mentioned in our 20th Dec opinion piece ( https://macro-spectrum.com/opinion/a-dovish-boj-still-looks-set-for-a-jan25-hike-of-25-bps) that BOJ was likely to hike by 25 bps in it’s 24th Jan meeting. We now firmly believe this to be case. Not only the BOJ is more sure of Japanese economy's growth, it is more confident of the likely wage growth in this year's Shunto negotiations. The key to us was the 14th Jan speech by Deputy Governor Himino. In this speech Himino observed that various corporate surveys suggest that wage growth in FY2025 will be the same or higher than the previous year. Also, the report from the January 2025 meeting of BOJ branch general managers stated that there had been many reports about an increasingly wide range of companies in terms of sectors and company size understanding the need for sustained wage increases. We expect upward revisions to the inflation forecasts in light of higher crude & a depreciating JPY. We expect a total of 50 bps of hike in CY25 starting with the 1st hike of 25 bps in the 24th Jan meeting. We now expect USDJPY to test 150 soon if the 25-bps hike materialises in Jan meeting. View goes wrong if BOJ still waits & maintains status quo in it’s Jan meeting.
