UBS: Bank of Japan rate hikes appear warranted in coming months

Masamichi Adachi, chief Japan economist at UBS Global Research, said in a commentary that a Bank of Japan rate hike in the coming months appears warranted. He noted that Japan's negative real interest rates make for very loose financial conditions. Inflation dynamics appear to support the view that the central bank should reduce its accommodative policy stance, citing expectations that long-term inflation will continue to rise toward 2.0%. He also expects the government to pursue fiscal expansion, which could mean higher inflationary pressures. UBS expects the Bank of Japan to raise its policy rate by 25 basis points in January, but does not rule out a December rate hike. (Jinshi)