Rabobank’s Senior FX Strategist Jane Foley notes that Governor Ueda’s earlier hawkish signals have been tempered by more cautious comments at the IMF meetings, leading some forecasters to doubt an April Bank of Japan (BoJ) rate hike. Surveyed BoJ watchers still mostly expect tightening by end-June, while stronger real wages and upcoming Consumer Price Index (CPI) data are seen as key inputs for the policy path.

Ueda signals and domestic data watched

"Governor Ueda has provided various hawkish signals this year. That said, the remarks he made at the Washington IMF meetings last week were interpreted by some commentators as a deliberate attempt to steer clear of providing the market direct guidance on interest rate policy."

"In contrast, many commentators had expected the Governor to use the opportunity to prepare the market for a rate hike at the April 28 policy meeting. As a result some forecasters have become more dubious as to whether the BoJ will push forward with a rate hike next week."

"The result of the most recent Reuters survey indicated that 2/3rds of BoJ watchers are confident that the BoJ will hike rates by the end of June. The survey suggested that similar probabilities are assigned to the move coming in April or June."

"Other recent economic data releases have shown a stronger than expected 1.9% y/y rise in February real wages, marking the second consecutive gain. This will encourage optimism that Japan was moving towards an environment of improved domestic demand ahead of the war which strengthens the case for a rate hike this month."

"Japanese March national CPI inflation data are due for release on April 24. This release will likely be watched carefully by policymakers."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)