BlackRock: Bank of Japan to Proceed Cautiously on Further Rate Hikes

BlockBeats News, June 16th, Ben Powell of BlackRock's think tank stated that the Bank of Japan may proceed cautiously with further rate hikes after the central bank raised rates to the highest level since 1995.

Domestically, robust wage growth, strong underlying inflation, and deeply negative real rates have supported the case for a tightening policy.

Internationally, hopes for a de-escalation of the Middle East situation have eased the ongoing energy shock threat, which should help contain imported inflation.

Nevertheless, there is still a risk of inflation rates exceeding the Bank of Japan's 2% target. The institution remains underweight on Japanese government bonds, expecting rate hikes, elevated global term premiums, and large-scale issuances to continue putting upward pressure on yields. Over a 6 to 12-month horizon, the institution holds a neutral view on Japanese stocks as the cost of imported energy may still weigh on returns. In the long term, the institution maintains an overweight position relative to the benchmark as inflation and wage trends support corporate profitability. (FXStreet)