BOJ policymaker Takata: It is currently hard to determine the desirable pace of rate hikes

• Does not think that the BOJ is behind the curve for now
• But want to ensure BOJ doesn’t fall behind the curve in addressing inflation risks
• Difficult to determine the desirable pace of rate hikes and also the terminal rate
• Pace of future rate hikes will depend on economic, price, market developments at the time
• There are pros and cons to a weak Japanese yen currency

The comments above are more neutral but we’ve already seen his hawkish side earlier in the day here. Adding to the commentary from earlier was BOJ governor Ueda who hinted that the March and April meetings will be live. That is despite prime minister Takaichi’s reported reservations and reluctance in wanting the BOJ to get on with the next rate hike so soon.

In terms of market pricing though, traders are not seeing any potential for a policy change on 19 March next month. The odds of there being no change to the policy rate are at ~87% currently. The following meeting on 28 April will be more interesting, with traders pricing in ~54% odds of a 25 bps rate hike.

It’s all going to ride on the spring wage negotiations and then seeing if Ueda & co. will have the appetite to deliver on another rate hike before Takaichi’s choice of replacement board members step in.

As a reminder, we will be seeing Asahi Noguchi and Junko Nakagawa depart from the central bank at the end of March and June respectively. They will be replaced by Toichiro Asada and Ayano Sato, both of whom are likely to shift the internal debate at the central bank and stall further rate hikes.

For some context, Noguchi – while being a dovish member – still sided with the last two rate hikes while Nakagawa is more of a consensus voter in keeping the peace. With Asada and Sato, one can expect both to reflect a more “reformed” dovish approach in aligning more with the government’s goal