"BOJ Continues Interest Rate Hikes... Timing of Additional Rate Hike in July"

NH Investment & Securities:
"BOJ to Maintain Rate Hike Stance,
Next Increase Expected in July"

Reuters Yonhap News

NH Investment & Securities expects the Bank of Japan (BOJ) to continue its rate hike stance and forecasts an additional rate increase in July.

According to NH Investment & Securities on the 26th, the BOJ holds the view that, given the presence of underlying inflationary pressures, it is appropriate to adjust the degree of monetary easing through gradual rate hikes.

Recently, the BOJ raised the benchmark interest rate by 25 basis points (1bp = 0.01 percentage points) to 0.5% with a majority vote of 8 to 1. The rates on operations linked to the benchmark rate were all raised simultaneously, and the operation supporting bank loans was confirmed to end as scheduled at the end of June. Market price changes after the rate hike were minimal, leading to an assessment that the BOJ achieved its intended goal.

Jeon Byung-ha, a researcher at NH Investment & Securities, stated, "Since the BOJ mentioned gradual rate hikes, the timing of the next rate increase is important, and we expect the next rate hike to occur in July." He added, "Currently, market participants expect one more rate hike by October, but upward revisions in inflation forecasts will justify a rate hike in July."

A rate hike earlier than July is considered undesirable by the BOJ as it would cause volatility in the currency value and market interest rates. For this reason, NH Investment & Securities forecasts gradual rate hikes at six-month intervals and sets the final target for the benchmark interest rate increase at 1%.