Japan Macro: Diet Session and BOJ Policy Outlook

Mizuho analyzes the upcoming 18 February Diet session and potential Bank of Japan rate hikes driven by yen weakness and US Fed leadership changes.

Key Takeaways

• 1.An extraordinary Diet session is expected on 18 February to re-install Sanae Takaichi as Prime Minister and deliberate on the FY2026 budget.
• 2.The Bank of Japan (BOJ) is showing a hawkish lean, with potential rate hikes as early as March or April to defend the yen.
• 3.Renewed yen weakness is driven by PM Takaichi's comments and the appointment of Kevin Warsh as the next US Fed Chair.

Table of Contents

• Extraordinary Diet session penciled in for 18 February
• 'Hawkish' BOJ policy board members to be given opportunities to speak
• Appointment of a successor to Asahi Noguchi set to become a focus post-election
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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