MNI BoJ Review-Jan 2026: Steady, Uncertainty On Next Hike

EXECUTIVE SUMMARY: 

• As widely expected, the BoJ left rates on hold at its January policy meeting. This was the broad sell side consensus along with market pricing, which gave little chance to a hike at the meeting. A move was seen as very low risk, particularly after the December hike at the end of 2025.  Much focus was on the outlook in terms of when the next BoJ hike may materialize. 
• Our sense is that the next window for a BOJ hike will be around mid year, consistent with market pricing of a June hike (see below for more details). Still, there are risks this could be moved forward, potentially to April. Watch points will be fiscal impetus post the election, along with JPY trends (weakness beyond 160 in USD/JPY could prompt an earlier hike), while by April we should also have more information on 2026 wage outcomes.  
• Market pricing, as at today, gives only a modest chance to a hike at the March policy meeting. April has an implied rate of 0.915%, against a current effective rate of 0.728%, so around 75% chance of a 25bps tightening priced in. A full hike is more than priced in for the June meeting, while by year the implied rate is above 1.40%. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: BOJ Review - Jan 2026.pdf