Bank of Japan Rate Hike Taper Pause and Market Reaction

The Bank of Japan raised its policy rate to 1.00% and signaled ongoing normalization despite a halt in bond purchase reductions. HSBC analysts anticipate further tightening in December amid persistent inflation risks.

Key Takeaways

• 1.The BoJ raised the policy rate by 25bp to 1.00%, with another 25bp hike expected by year-end.
• 2.The BoJ decided to halt the JGB purchase reduction plan in FY2027, maintaining a 'natural' landing level of JPY2trn per month.
• 3.The JPY remains under pressure due to negative real interest rates and speculative short positioning, potentially requiring MoF intervention.

Table of Contents

• Bank of Japan
• Economics: Gradually reaching policy normalisation
• FX: BoJ done, moving on to the FOMC...and MoF?
• Rates strategy: The scales are tilting
• Disclosures & Disclaimer
• Multi-Asset Japan
• JPY: No fireworks from the BoJ...passing the baton to the MoF?
• Rates strategy: The scales are tilting
• Updates to the bond purchase plan
• Disclosure appendix

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