BOJ considers accelerating rate hikes, market sees policy rate at 2% in view; focus on avoiding yen depreciation and interest rate shock

BOJ considers accelerating rate hikes, market sees policy rate at 2% in view to avoid yen depreciation and interest rate shock The Bank of Japan is considering accelerating the pace of rate hikes, and expectations are growing in the market that the policy rate will be raised to 2%. Natixis and MUFG expect a 25bp hike on September 18 to bring the rate to 1.25%, and the consumer price inflation rate in July also rose to 1.9%. 12

Japanese investors' net buying of overseas assets exceeds 5 trillion yen, capital outflows accelerate via yen carry trade According to Ministry of Finance statistics, in the week through August 14, net buying of overseas stocks was 1.39 trillion yen and long-term bonds 1.14 trillion yen, bringing the cumulative total above 5 trillion yen. The background is carry trades exploiting low domestic interest rates and yen depreciation, with life insurers and trusts believed to be the main players. 3

71.7% of public concerned about fiscal deterioration from tax cuts, cabinet approval rating at record low In a Kyodo News opinion poll, 71.7% expressed concern that the government's tax cut plan would worsen fiscal conditions, and the cabinet approval rating hit a record low. Distrust of the Takaichi administration's aggressive fiscal policy is strengthening. 4

April-June GDP up 1.1% annualized, personal consumption falls for first time in 8 quarters but remains resilient Real GDP for April-June rose 1.1% at an annualized rate from the previous quarter, below the market forecast of 2.0%. Personal consumption turned slightly negative for the first time in eight quarters, but due to statistical reclassifications from free education and the impact of Middle East tensions, resilience above the potential growth rate is maintained. 5