BoJ likely to raise policy rate in September – Societe Generale
14.06.2024, 13:57

BoJ likely to raise policy rate in September – Societe Generale

As expected, the Bank of Japan (BoJ) kept the policy rate unchanged at Friday's meeting. However, it announced that it would start reducing its Japanese Government Bond (JGB) purchases after its July monetary policy meeting and that it would lay out the details of its reduction plan for the next one to two years at that meeting, says Jin Kenzaki, Head of Research for Japan at Societe Generale.

BoJ is set to reduce its monthly JGB purchases to zero in 1-2 years

"Given the BoJ’s announcement that it will lay out the details of its reduction plan for the next one to two years, there is a possibility that the BoJ will reduce its monthly JGB purchases to zero over the next one to two years."

"Until this announcement, we had predicted that the purchase amount would decrease to JPY4tn by the end of this year and JPY3tn by next spring, but given the pressure from the government to address the weak yen, we now think the most likely scenario will be a reduction starting in August, with purchases declining by JPY1tn every three months and reaching zero by November of next year."

"On the other hand, considering that the BoJ will announce a specific policy for reducing its JGB purchases at the July meeting, its potential impact on the market may reduce, in our view, the likelihood of a rate hike at the July meeting. We continue to expect a rate hike at the September meeting."

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