UBS: The Bank of Japan's interest rate hike in the coming months seems justified.

On October 21, Masamichi Adachi, the chief Japan economist at UBS Global Research, commented that it seems justified for the Bank of Japan to raise interest rates in the coming months. He stated that Japan's real interest rates are negative, which makes the financial environment very accommodative. The inflation dynamics seem to support the view that the central bank should reduce its easing policies, as long-term inflation expectations are expected to continuously rise towards 2.0%. He also anticipated that the government would seek fiscal expansion, which could mean higher inflationary pressures. UBS expects the Bank of Japan to raise the policy interest rate by 25 basis points in January, but does not rule out the possibility of a rate hike in December. ( Jin10 )