Bank of Japan: Rate hike no longer likely - BNPP

Analysts at BNP Paribas suggest that the rate hike is off the table for Bank of Japan due to the recent macro developments in domestic and international arena.

Key Quotes

“CPI data surprised on the downside again in April. Add in the recent strength of the yen, and we are revising down our inflation forecast.”

“As the new inflation forecast does not support our call since the start of the year that the BoJ would hike the target for the long-term rate this year, we decided to take it off.”

“Even if the global economy continues to recover, the BoJ may be unable to hike rates even once in this cycle due to the impact of the Fed’s tightening on China.”

“As politicians are becoming wary about the BoJ’s expanding balance sheet though, there is a risk that the BoJ may be forced into a policy exit, even if inflation remains subdued.”