Nikkei Jumps as BOJ Rate Hike Bets Build Despite Cooling Inflation
Tokyo – Japan‘s Nikkei 225 surged 0.84% Friday, leading gains across much of Asia, as markets anticipate the Bank of Japan (BOJ) may soon end its ultra-loose monetary policy despite recent data showing a slowdown in core inflation. The move comes amid growing confidence in Japan’s economic resilience and following signals from the Federal Reserve that it is indeed embarking on an easing rate path.
Economists polled by Reuters expect the BOJ to hold policy rates steady at 0.5% at its upcoming meeting. However, HSBC analysts forecast a 25 basis point rate hike at the BOJ’s October meeting, a view supported by recent economic indicators. Japan’s core inflation rate, which excludes fresh food prices, fell to 2.7% in August - its lowest level sence November 2024 and a third consecutive monthly decline, according to government data. Headline inflation also dropped to 2.7% from 3.1% in July, also marking a low not seen since November 2024.
Despite the cooling inflation, analysts point to stronger-than-expected second quarter GDP growth as a key factor supporting a potential policy shift. BOJ officials are reportedly seeking signs of economic strength, and the recent GDP print “certainly delivered,” according to the HSBC analysis.
Elsewhere in the region, Australia’s ASX/S&P 200 climbed 0.77%. South Korea’s Kospi and small-cap Kosdaq were flat at the open. Hong Kong’s Hang Seng Index slid 0.4%, while the mainland’s CSI 300 added 0.13%.
The positive sentiment follows a strong session in the U.S., where the S&P 500 closed up 0.48% at 6,631.96, the Nasdaq composite popped 0.94% to 22,470.73, and the Dow Jones Industrial average added 124 points, or 0.27%,to close at 46,142.42. All three major U.S.indexes reached fresh all-time intraday highs on Thursday.
Yields on Japan’s 2-year government bonds rose to 0.885%, the highest since June 2008, according to LSEG data.
