.July 30, 2024 03:55:15 AM

The Bank of Japan (BOJ) is holding a policy meeting, with speculation about a potential rate hike and exit from quantitative easing (QE) gaining traction. Recent signs of inflation pick-up in Japan, driven by higher wages, could justify a rate hike as the BOJ aims to reach its 2% annual inflation target. Analysts warn of intensifying upside risks to inflation, which might prompt the BOJ to adjust its inflation forecast or acknowledge these risks in its statement.

The BOJ sees a virtuous cycle forming where rising wages lead to higher consumption, boosting inflation. However, real wage growth in Japan remains negative, potentially influencing the BOJ to maintain its accommodative stance. While a rate hike may be on hold, the BOJ is expected to signal a gradual scaling back of its massive QE program, marking a shift from ultra-loose monetary policy.

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