The probability of interest rate hike by the Bank of Japan next week has increased significantly! "Trump" has become the only variable.

According to informed sources, Japanese central bank officials generally believe that the likelihood of a rate hike next week has significantly increased if Donald Trump's entry into the White House does not trigger too much negative surprises. Specifically, unless Trump causes significant market disruptions or changes global economic expectations early in his presidency, the Bank of Japan is highly likely to raise interest rates after the two-day meeting ending on January 24 from the current 0.25%. This decision is not hasty, as the Bank of Japan will conduct a detailed review of economic data, market dynamics, and the impact of U.S. economic policies on the eve of the meeting to ensure the reasonableness of the final policy decision. This week, Bank of Japan Governor Haruhiko Kuroda and his deputy Masayoshi Amamiya have explicitly stated that the January meeting will be a key moment to decide whether or not to raise interest rates, a statement that aligns with market expectations of a rate hike this month. As a result, the yen has risen against the U.S. dollar for two consecutive days, reaching its highest point in a month. Rodrigo Catril, a forex strategist at the National Australia Bank in Sydney, pointed out, "Everyone is eagerly awaiting the Bank of Japan's decision to raise interest rates next week, and officials' attitudes are becoming more and more resolute. Although Trump's tariff policy may be an uncertainty, Japan is not his primary focus." In terms of economic outlook, Bank of Japan officials believe that the Japanese economy and inflation will continue to develop along their forecasted trajectory, providing them with confidence to achieve their stable 2% inflation target. Kuroda has emphasized multiple times that if price and economic trends align with the Bank's forecasts, the Bank will appropriately adjust its monetary easing policy. According to informed sources, the Bank of Japan may raise its inflation forecasts for this fiscal year and the next fiscal year (excluding fresh food and energy) to support its rate hike decision. Since the last meeting in December, officials have also gained confidence in wage increases, especially after the branch managers' meeting earlier this month. They expect annual spring wage negotiations to achieve similar positive results as last year, as Japanese companies are gradually viewing pay raises as the norm. Kuroda stated that besides the outlook for the U.S. economy, the momentum of wage growth is one of the key factors to closely monitor when deciding on a rate hike. While Bank of Japan officials hope for a smooth start to Trump's second term, they also realize the need to remain vigilant to address potential risks. It is worth mentioning that Amamiya explicitly stated in a speech to business leaders in Yokohama on Tuesday that the Board of Directors will discuss the possibility of a rate hike next week. He emphasized, "When implementing monetary policy, judging the right timing is both difficult and crucial." He also revealed that the Board will decide whether to raise the policy rate based on the economic outlook summarized at the monetary policy meeting on January 23-24. These comments further highlight the possibility of a rate hike by the Bank of Japan this month. Most observers believe that the Bank of Japan will raise borrowing costs in January or March. Amamiya also pointed out that there are both upside and downside risks, and he and Kuroda agree that the momentum of wage growth this year and U.S. economic policy under the new government are worth closely monitoring. In his last scheduled speech before the Bank's Policy Board meeting next week, Amamiya predicts that wage growth this year will remain robust. He mentioned labor shortages, minimum wage increases, and recent survey results showing wage growth has reached or exceeded levels from a year ago, when unions and companies agreed to the largest wage increase in 30 years.