BOJ not as dovish as thought, December hike on?
Oct 11 (Reuters) -Recent comments from Japanese central bank andgovernment officials suggest there is still room for the Bank of Japanto hike rates again in December.
Following newPrime Minister Shigeru Ishiba's observationon Oct 2that Japan may not be inan environment for additional rate hikes nP8N3KT00F, various officials have expressedviews watering down or even contradicting what the PM said.
Chief Cabinet Secretary YoshimasaHayashi said the following day that the PM did not make any specific request to BOJ Governor Kazuo Ueda at their meeting nP8N3KT03P. Economy Minister Ryosei Akazawa later said thegovernment trusts the BOJ's decisions on monetary policy and would not oppose further adjustments to policy if economic data and theBOJ outlook supported such moves nP8N3KF0CF, nL1N3LK0EL, nP8N3KU01A.
Ishibahimself noted on Oct 3 that he will work closely with theBOJ and do his utmost for an early exit from deflation nL4N3LF0TC. But recent price trendssuggest Japan has already rid itself of deflationary tendencies and enteredan era of limited inflation around the BOJ's 2% target nL1N3LM01H, nL4N3LJ0B5, nAZN28WGQX.
BOJ Deputy GovernorRyozo Himino explicitly stated on Thursdaythat theBOJ will consider hikingrates if it has more confidence in its forecasts nP8N3KU01M, nP8N3KU01N, nL1N3LM08Y. And a fresh BOJ survey suggestsmost Japanese households expect prices to continue to rise a year from now nP8N3KS0C2, nL1N3LM040.
With Japan Inc also wary of fresh yen weakness, the BOJ may have no recourse but to maintain a hawkish stance if only tokeep the yen from weakening further from current lofty USD/JPY levelsnL1N3LJ06C, nP8N3KG02K. Related comment nL1N3LL05Y.
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Bank of Japan benchmark interest rate: https://reut.rs/3zoCHL8
The BOJ is in hiking mode: https://reut.rs/3zoU6TJ
USD/JPY: https://tmsnrt.rs/3NkZtqw
Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
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