EBC Markets Briefing | BOJ set for another rate hike this week

The yen went sideways on Thursday. The currency dropped to the lowest level in six months earlier this month, followed by verbal warnings from currency authorities hinting at readiness to intervene.

Governor Kazuo Ueda and Deputy Governor Ryozo Himino have both indicated the willingness to hike rates. LSEG data indicates nearly 88% probability of a hike in the upcoming meeting.

The BOJ is expected to raise interest rate this week by 25 bps, according to a survey of economists polled by CNBC. They said headwinds which had prevented a rate hike last month were diminishing.

Should the hike materialize as widely expected, this would be Japan’s third rate move in less than 12 months, after 17 years without an increase before last March due to the perennial problem of deflation.

A weak yen could be a major reason to raise borrowing costs. Local retail investors as well as overseas hedge funds and asset managers have collectively boosted bearish yen wagers by 54%, according to Bloomberg analysis.

Japanese consumer prices grew slightly more than expected in November. The annual rate hit a four-month high, although a separate report showed household spending remained soft in the country.

The 50 SMA still caps the rally of the yen, and a double-bottom pattern indicates a tumble below 157 per dollar.

EBC Financial Risk Management Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Financial News or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.