Kaiyuan Macro: It is expected that the Central Bank of Japan will raise interest rates in January, and the tightening magnitude will exceed expectations

According to Jinshi Data on December 19, Capital Economics stated that the Bank of Japan seems likely to restart its tightening cycle. Marcel Thieliant, the bank’s head of the Asia-Pacific region, stated that the data in recent months clearly shows that the Bank of Japan has reasons to further tighten its monetary policy. However, the Bank of Japan wants to wait until January next year to release the new round of forecasts before tapping the brakes again, and this is reasonable. The Bank of Japan has not given much clues about its policy outlook, but Thieliant pointed out that unlike the decision in October, the decision in December was not unanimously approved. He now expects a 25 basis point rate hike in January and insists that the Bank of Japan’s tightening will exceed market expectations. He believes that consumer prices have accumulated new momentum, and as service sector inflation becomes more widespread, the Bank of Japan should have confidence that price pressures are endogenous rather than exogenous.