2026-02-19 08:32:00
Hanzawa says that: “There is a reasonable possibility that the BOJ will raise interest rates as early as in March or April.”
For now, markets are not really expecting one to come next month at least. That as the Japanese central bank will still have to wait on how the spring wage negotiations play out. The next policy meeting will take place on 19 March, and traders are pricing in ~89% of no change to interest rates.
As for the 28 April meeting, the odds of that are skewed to the other side. Traders are instead pricing in a ~64% probability of a 25 bps rate hike to take the policy rate to 1.00%.
Despite pressure from the Takaichi government, policymakers at the central bank continue to stick to their guns for the most part. So far though, they are not really wanting to get involved in interfering with the yen currency. And for the most part, they are just focusing on the inflation battle still.
But amid plans by the government to increase fiscal spending, they are hoping the BOJ will play ball so as to not raise interest rates any time soon. That conflict is what is also in part driving much tension in market sentiment towards Japan, with the yen and Japanese government bonds being sold heavily.
In looking to the March and April meetings, it will be important to look out for BOJ commentary once we get more details on how the spring wage negotiations develop in the weeks ahead. We’ll find out the numbers soon enough.
However, I would argue that it is going to be a similar case to last year. That is if the BOJ wants to get on with rate hikes, they’d better not rest on their laurels and get a move on. The timing window will just continue to close in on them, that especially since wage hikes this year are not expected to be as strong as last year – even if they are going to be at a reasonably higher level historically.
It is expected that wage talks will result in a 5% pay hike or higher once again. And that is keeping alive expectations for the BOJ to at least bring the policy rate to 1% by mid-year.
