A former BOJ official cites potential inflation near 3% as grounds for an earlier-than-expected rate hike, pressuring JGB yields and the yen.
A former Bank of Japan executive said the central bank is likely to raise rates before December, citing a potential inflation measure averaging near 3% over the past four years. This gauge, excluding fresh food and government subsidies, exceeds the BOJ’s 2% target and contrasts with May’s core CPI of 1.4%.
Markets have priced in a later move, but an earlier hike could narrow the policy gap with the Fed and ECB, tightening financial conditions. Japanese government bond yields would rise across the curve, with ripple effects for global fixed income given Japan’s foreign bond holdings.
Governor Ueda’s signals on the potential inflation measure’s influence in board deliberations could act as a hawkish catalyst, accelerating yen appreciation and market repricing.