The recent turmoil in Japan’s bond market seems to have prompted some soul-searching among policymakers in Tokyo and we remain convinced that a decisive LDP victory in the upcoming Lower House election won’t herald another round of large-scale fiscal loosening. Nonetheless, the BoJ remains in a hawkish mood amidst mounting signs that inflationary pressures will remain stronger for longer. The upshot is that we’re bringing forward our forecast for the next rate hike from July to June.
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