As the BOJ cites wage growth as a condition for a virtuous cycle of price increases and monetary policy normalization, an upward revision to real GDP for the April-June quarter has prompted views that wage hikes could support a rate hike. Meanwhile, recent yen appreciation has clouded the outlook for the timing of the next rate hike.
The BOJ has made wage growth, linked to price increases in a virtuous cycle, a precondition for normalizing monetary policy. The view has emerged that wage growth near 3% could help justify a reduction in monetary easing.
Real GDP growth for the April-June quarter, revised and released today, was upgraded to 0.4% quarter on quarter, or 1.4% annualized. Upward revisions to capital investment and resilient private consumption contributed to the improvement from the preliminary figure.
Meanwhile, the yen's move toward appreciation over the past few days could raise expectations for a BOJ rate hike while potentially easing concerns about the exchange rate. Assuming a rate hike at the September meeting, a scenario is possible in which the USD/JPY rate remains around ¥150, leading the BOJ to avoid or delay two rate hikes this year and postpone the next hike until January 2027 or later.