(Bloomberg) -- Economists at two major financial firms pushed out expectations for the Bank of Japan’s next interest rate hike to March 2025 from January after Governor Kazuo Ueda struck a cautious tone in his monetary policy briefing Thursday.
Bank of America Corp. and Nomura Holdings Inc. analysts revised their predictions after the BOJ held rates Thursday and Ueda said in a press conference that officials required more certainty on wage growth and President-elect Donald Trump’s policies before making a call. Markets were anticipating a more hawkish tone from the central bank, which until yesterday was seen most likely raising rates in January.
“The tone of Governor Ueda’s press conference was unambiguously dovish,” Bank of America analysts led by Japan and Asia economist Izumi Devalier said in a Dec. 19 note to clients. “He did not give any indications that the BOJ was leaning toward a January hike at this stage.”
Bank of America analysts see the BOJ delaying future monetary tightening, expecting the central bank to raise rates a quarter point in both October 2025 and April 2026 after the March move. Previously, the expectation was for January and July 2025 hikes, followed by another in January 2026.
Read: Japan’s Inflation Accelerates on Energy as BOJ Seeks More Data
Nomura analysts noted that as the yen weakened on Ueda’s remarks, “market participants will likely keep a close eye on any verbal intervention” from the Ministry of Finance and Ueda in the near term, including his planned speech on Dec. 25.
“The January meeting will still be another ‘live meeting’, where a rate hike remains a possibility,” the Nomura analysts wrote in their note. “However, we think Governor Ueda’s comments did not strongly support an increase in expectations for a January rate hike.”
Markets are already pricing in a delay. The yen dropped toa five-month low earlier Friday and yields on both two-year and 10-year Japanese notes fell. Overnight index swaps show only a 45% likelihood of a January rate hike now, down from about 60% at the end of last week.
Read: Japan Warns on Yen After BOJ’s Dovish Message Extends Slide
Japan’s currency chief Atsushi Mimura and Finance Minister Katsunobu Kato both said Friday they’re concerned about recent currency moves. Kato added that authorities would act where appropriate, which helped underpin the currency.
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