Standard Chartered Predicts 25 Basis Point Bank of Japan Rate Hike Before Normalisation Slows Standard Chartered analysts project a 25 bps rate hike to 1.25% at the Bank of Japan's September meeting, followed by a more cautious phase of policy normalisation due to sluggish economic growth. Standard Chartered analysts Chong Hoon Park and Nicholas Chia expect the Bank of Japan to implement a 25 basis point policy rate hike during its upcoming monetary policy meeting scheduled for 17-18 September, pushing the benchmark interest rate to 1.25 percent. The projected adjustment is viewed as a pre-emptive measure to address lingering inflationary pressures, though financial experts caution that any subsequent policy normalisation will likely proceed at a far more measured pace due to underlying economic vulnerabilities. Standard Chartered Forecasts Bank of Japan Policy Tightening According to analysis provided by Chong Hoon Park and Nicholas Chia from Standard Chartered, the Japanese economy currently retains sufficient strength to absorb another modest interest rate increase. However, the path following the September meeting is expected to shift toward greater patience. The analysts highlighted that structural growth in Japan remains sluggish, while fiscal constraints are becoming increasingly pronounced. Inflation risks across the nation continue to escalate as elevated global energy prices and earlier Japanese Yen depreciation propagate through domestic supply chains. While price pressures are intensifying, domestic consumer spending has failed to gather significant momentum, leaving economic recovery reliant on fragile dynamics. Economic Pressures and Fiscal Constraints Facing Japan A major portion of Japan's recent inflation is driven by external imported factors rather than robust internal demand. At the same time, yields on Japanese Government Bonds (JGBs) have experienced a sharp upward surge. This rise in yields has direct consequences for national finances, as elevated interest expenses begin to place meaningful constraints on the Japanese government's fiscal leeway. The combination of sluggish private consumption, rising debt servicing costs, and imported cost pressures creates a complex backdrop for central bankers. Standard Chartered analysts noted that while a rate hike in September serves as a proactive defense against rising costs, the central bank will likely adopt a prolonged period of observation before making further monetary adjustments. USD/JPY Approaches 155.00 Amid High US Yields and Central Bank Meetings In the currency markets, the US Dollar to Japanese Yen pair continued its upward momentum on early Tuesday, pushing toward the 155.00 threshold. Investors and currency traders are closely monitoring the dual central bank meetings scheduled for this week, with both the Federal Reserve and the Bank of Japan taking center stage. The US Dollar maintains strong support from elevated US Treasury bond yields, which remain near multi-year highs. Expectations of persistent Federal Reserve rate hikes, combined with renewed inflation risks stemming from elevated global crude oil prices, have reinforced Greenback strength. Nevertheless, market participants recognize that any hawkish shifts or hawkish repricing in the Bank of Japan's policy outlook could provide underlying support to the Japanese Yen, potentially capping further gains in the USD/JPY exchange pair. Aussie Dollar Struggles Below 0.7150 on Mixed China Data and Yield Pressure Meanwhile, the Australian Dollar remains under pressure, trading below the 0.7150 mark during Tuesday's Asian trading session. The currency lingered near its lowest level in over three weeks, a position first touched on Monday. The AUD/USD currency pair continues to face headwinds from persistent US Dollar strength and elevated American bond yields. Additionally, economic activity data from China for August yielded mixed results, failing to provide the momentum required to revitalize the Australian Dollar. Given Australia's strong trade ties with China, neutral or inconsistent Chinese economic indicators typically limit upside potential for the Aussie currency. Gold Retreats Near One-Month Low Ahead of Crucial FOMC Decision Gold prices experienced a second consecutive session of decline on Tuesday, dropping by 0.80 percent during the first half of the European trading session. Spot gold traded within the $4,265 to $4,264 per ounce range, hovering close to the one-month low recorded during the previous session. Traders in precious metals are exercising caution ahead of the Federal Open Market Committee (FOMC) two-day policy meeting, which begins later today. High bond yields and a firm US Dollar continue to weigh on non-yielding bullion, as market participants await clearer guidance regarding interest rate trajectories and global macroeconomic stability. What this means for you Central bank rate decisions and currency market fluctuations directly influence international borrowing costs, investment returns, and import prices. • Across India: Rising global bond yields and stronger US Dollar trends can put pressure on the Indian Rupee, potentially increasing the cost of imported goods such as crude oil and electronics. • For Forex and Commodity Investors: Higher US yields and central bank policy shifts create increased volatility in foreign exchange pairs like USD/JPY and gold prices, requiring careful risk management. • For International Travelers: Currency movements between major global pairs affect foreign exchange rates, impacting total travel expenditure and overseas transaction costs. • For Fixed-Income Investors: Surging government bond yields across major economies signal changing interest rate cycles that impact debt fund returns and global bond valuations. Why this happened The Bank of Japan's potential rate increase is driven by rising supply chain inflation stemming from energy costs and currency depreciation, while US yields remain high due to persistent inflation risks. • Imported Inflationary Pressures: Higher global energy prices combined with earlier Japanese Yen weakness have driven up input costs across domestic supply chains in Japan. • Elevated US Bond Yields: Strong market expectations regarding Federal Reserve policy and oil-driven inflation risks have kept American Treasury yields near multi-year highs. • Japanese Fiscal Constraints: Sharp increases in Japanese Government Bond yields have elevated national interest expenses, limiting fiscal flexibility and necessitating a cautious rate path. • Global Central Bank Divergence: Anticipation surrounding upcoming policy meetings of both the FOMC and the Bank of Japan has heightened market sensitivity across foreign exchange and commodity markets. Questions & Answers 1. What rate hike is Standard Chartered predicting for the Bank of Japan? Standard Chartered analysts predict a 25 basis point hike in the policy rate to 1.25 percent during the 17-18 September meeting. 2. Why is the Bank of Japan expected to slow down rate hikes after September? The central bank is expected to adopt a more patient stance due to slow structural economic growth, weak private consumption, and rising fiscal debt servicing costs. 3. What factors are pushing USD/JPY toward the 155.00 mark? High US Treasury bond yields, expectations surrounding Federal Reserve rate policy, and oil-driven inflation concerns are strengthening the US Dollar against the Yen. 4. How is gold performing ahead of the FOMC meeting? Gold traded lower around $4,265-$4,264 per ounce, down 0.80 percent in European trading as high US bond yields weigh on the non-yielding metal. https://trendkia.com/en/market/standard-chartered-ka-anumana-nitigata-daron-men-barhotari-ke-bada-dhimi-hogi-bank-of-japan-ki-samanyikarana-prakriya-32449 TrendKia — Har trend, sabse pehle.