BNPP discusses the potential of the Bank of Japan (BoJ) indicating a near-term shift in its policy stance, as early as its October meeting. While BNPP's baseline expectation is for the BoJ's significant policy alterations to emerge in April 2024, recent market dynamics suggest a faster-paced adjustment.
1. Current Expectations for Policy Changes:
- BNPP's primary scenario anticipates the BoJ's principal policy adjustments, including exiting the negative interest rate policy, in April 2024.
2. Possibility of Early Signalling:
- There is an increasing likelihood of the BoJ hinting at significant policy amendments during its October meeting, suggesting that these changes might materialize around the commencement of the next year.
3. Ceiling for the 10-Year Rate:
- With the market rate for the 10-year note climbing to approximately 0.80%, there exists a risk that the BoJ might elevate the ceiling for this rate.
- An indication from the BoJ about an impending rate hike could push this market rate closer to the existing ceiling of 1%.
BNPP emphasizes the evolving dynamics of the BoJ's policy decisions, underscoring the significance of the October meeting in shedding light on potential shifts. Market participants should be vigilant of any hints that could suggest the BoJ is leaning towards a faster rate of policy modification than previously anticipated.