Once again, the financial markets are betting that there's a 53% chance the Bank of Japan (BOJ) will tighten monetary policy after its March 18-19^th meeting and 80% no later than April 26^th. Traders were just as sure right before a few of the most recent BOJ meetings and have lost a considerable amount of money by being wrong. Unfortunately, the Bank has been giving out mixed signals, some of them suggesting that it might move that quickly. (I'll discuss one of them below regarding wage trends.) Then, at a February 29 press conference, Governor Kazuo Ueda seemed to be trying to tamp down anticipation of such an early move, saying, "As to the question of whether we are in a situation where we can foresee the inflation target as attained sustainably and stably, in my view, we are not there yet."

            Whenever the BOJ does move, it would not mean a substantial quick rise in interest rates, but a slow, incremental adjustment. The BOJ's stance was outlined in a Feb. 8^th speech by Deputy Governor Shinichi Uchida, who stated, "Of course, if the Bank does revise [its] framework, it will incline more toward letting interest rates be determined by the market. In doing so, however, it will take careful measures...[to] make sure that the amount of JGB purchases will not change significantly and interest rates will not rise rapidly."

For details, see https://richardkatz.substack.com/p/how-much-change-when-boj-eventually

Richard Katz
The Contest for Japan's Economic Future