Japan raises interest rates by 25 basis points, in line with expectations. Whether the news is more positive or negative depends on what signals are conveyed in the press conference—whether it’s “a dove” or “an eagle.” Until there is no press conference, it has generally been more of a positive development; expectations for the rate hike have already been priced in.
The OIS market’s currently traded terminal rate is around 2.0%~2.5%. If the signals released by Governor Ueda in the press conference are weaker than the hawkish level already priced by the market (i.e., it does not clearly point to a path above 2%), the yen may face renewed downward pressure; conversely, if it is overly hawkish, it could further intensify selling pressure in Japanese government bonds.
In short, the September rate hike itself has already been fully expected. The real incremental information lies in any hints Ueda may offer about the “terminal rate” and the “path after the spring labor negotiations of 2027.” This will determine the pace of unwinding carry trades and the yen’s near-term direction.
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The OIS market’s currently traded terminal rate is around 2.0%~2.5%. If the signals released by Governor Ueda in the press conference are weaker than the hawkish level already priced by the market (i.e., it does not clearly point to a path above 2%), the yen may face renewed downward pressure; conversely, if it is overly hawkish, it could further intensify selling pressure in Japanese government bonds.
In short, the September rate hike itself has already been fully expected. The real incremental information lies in any hints Ueda may offer about the “terminal rate” and the “path after the spring labor negotiations of 2027.” This will determine the pace of unwinding carry trades and the yen’s near-term direction.
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