Analysts are split over the timing of when will the BOJ tighten monetary policy, in light of the inflation numbers and wage hikes.
Core inflation in Japan strips out prices of fresh food from the overall consumer price index. Headline inflation rate came in at 3.3% in June, rising slightly from 3.2% seen in May.
In a note, Barclays economist Tetsufumi Yamakawa said much of the market still appears to view rising prices in Japan as "transitory," attributing it to a "cost push" instead of a "demand pull." "We expect 'shunto' wage hikes to be smaller in fiscal year 2024 than in fiscal year 23, but forecast an increase of around +3%, which would be consistent with +2% price stability target," Yamakawa wrote.Given this, investors will be looking for signs that the BOJ will shift its stance on its ultra-loose monetary policy — or more specifically, its "yield curve control" policy.
To Smith, there is "plenty of probability" for the BOJ to shift its stance on YCC at the next central bank meeting next Friday.
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