Fixed Income Japan: BOJ Policy Update

The Bank of Japan has raised its policy rate to 1% amid improved economic conditions and a strategic 'hands-off' approach from the Takaichi administration. Mizuho forecasts a terminal rate of 1.5% with further hikes occurring at a semi-annual cadence.

Key Takeaways

• 1.The Bank of Japan raised its policy rate by 25bp to 1%, reflecting diminished downside risks to the economy.
• 2.The rate hike was facilitated by the Takaichi administration's hands-off approach, aimed at avoiding political fallout and 'Truss shock' scenarios.
• 3.Mizuho forecasts a terminal policy rate of 1.5% with the next rate hikes expected in December 2026 and June 2027.

Table of Contents

• Overview
• Key points
• Our main scenario is for a terminal rate of 1.5% with the next hike coming in December
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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