Barclays frontloads subsequent BOJ hike to January from April

Barclays has moved up its forecast for the next Bank of Japan rate hike to January 2025, citing anticipated labor cost pass-through to service prices and a clearer outlook on wage hikes for FY25.

Key Points:

1. Revised Forecast:

   • Barclays now expects the next BoJ rate hike to occur in January 2025, with a possibility of an earlier move in December 2024. This is an adjustment from their previous expectation of an April 2025 hike.

2. Rationale for the Adjustment:

   • The shift in the timeline is driven by expectations that labor costs will pass through to service prices by year-end. Additionally, a clearer outlook for FY25 wage hikes is anticipated by the start of the new year, influencing the BoJ’s decision-making process.

3. Further Hike Expected:

   • Barclays also forecasts an additional rate hike in July 2025, raising their projection for the terminal rate from 0.5% to 0.75%.

Conclusion:

Barclays has adjusted its timeline for the next BoJ rate hike, moving it up to January 2025, with an increased terminal rate forecast of 0.75% by July 2025, reflecting expectations of rising labor costs and service prices.

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