BlackRock: The Bank of Japan will proceed cautiously with further interest rate hikes

BlockBeats News, June 16 — Ben Powell of the BlackRock Think Tank said that after the Bank of Japan raised interest rates to the highest level since 1995, the central bank may act cautiously about further rate hikes.

Domestically, solid wage growth, firm core inflation, and real interest rates that remain deeply negative support the rationale for tightening policies.

Abroad, hopes that Middle East tensions will cool have eased the threat posed by ongoing energy shocks, which should help curb imported inflation.

That said, there is still a risk that the inflation rate will exceed the Bank of Japan’s 2% target. The institution keeps an underweight position in Japanese government bonds and expects that rate hikes, elevated global term premiums, and large-scale issuance will continue to put upward pressure on yields. Over the 6 to 12 month horizon, the institution is neutral on Japanese equities, as import energy costs may continue to drag on returns. In the long run, it maintains an overweight allocation versus the benchmark because inflation and wage trends support companies’ profitability. (Jin10)