BOJ: Rinban Purchase Offer

Executive Summary:

• 25bp BOJ hike to 1.25% this week is near-certain, with consensus firmly supported by inflation approaching 2%, stronger wages, yen weakness and higher oil/import prices.
• The case for a 50bp move is broadly dismissed, with most expecting a “standard” 25bp hike; markets are instead focused on whether Ueda signals a faster tightening cycle.
• Views diverge beyond September: some expect another hike in December, while others favour January, with forecasts for the policy rate ranging from 1.75% to 2% by mid/late 2027.
• Key risks are increasingly two-sided: persistent inflation or renewed yen weakness could accelerate tightening, while weak domestic demand, the lagged impact of previous hikes and an approaching neutral-rate range argue for caution.
• September guidance will be crucial, particularly whether the BOJ retains its view that “financial conditions remain accommodative” and signals “back-to-back moves” or a more gradual path.
• See MNI BOJ Preview here:

Q2 GDP prints Thursday and the production estimate is forecast to rise only 0.1% q/q after Q1’s 0.8% bringing annual growth up to 2.2% from 1.5%. It is worth noting the data is prone to large historical revisions. The RBNZ expects a flat outcome on the quarter in Q2 with annual growth at 2.1% but then for the recovery to gather momentum in Q3. The data will be important for gauging capacity pressures going into Q3. 

• The RBNZ reiterated this month that growth remains “uneven” and Governor Breman said the consumer is the missing piece of the recovery. August card spending data was in line with this and it was definitely the case in Q2 with real retail sales contracting 0.5% q/q after Q1’s 1.0% rise. Other sectors were positive with manufacturing volumes up 0.8% q/q, export volumes +6.4% q/q and building volumes +4.8% q/q with upward revisions to Q1. Real imports fell 2.1% q/q in Q2 and so net exports should make a positive contribution to the expenditure measure of GDP.
• Analyst estimates for production-based GDP range between -0.3% q/q and +0.3% q/q leaving annual growth 1.8-2.5%. Of the domestic banks ANZ, and Kiwibank are in line with Bloomberg consensus, while BNZ and Westpac are forecasting 0.2% q/q & 2.4% and ASB 0.3% q/q & 2.4%.
• While ASB is above consensus, it sees upside and downside risks to its forecast principally due to data volatility. It expects growth to be driven by external-facing sectors, primary and goods-producing, while discretionary services should be weaker and private consumption negative on the quarter. It is projecting expenditure-based GDP to rise 0.4% q/q & 2.9% y/y. 

"*PBOC PAN: TO STRENGTHEN THE ROLE OF POLICY INTEREST RATES
*PBOC PAN: TO FURTHER REFINE POLICY RATES
*PBOC PAN: IMPROVE SHORT-TERM INTEREST RATE ADJUSTMENT MECHANISM

"*PBOC PAN: CHINA TO SUPPORT LGFV TO RESOLVE DEBT RISKS" - BBG" - BBG

"*PBOC PAN: SLOWER CREDIT GROWTH CAN STABILIZE DEBT LEVELS" - BBG

"*PBOC’S PAN SAYS SLOWER LOAN GROWTH MAY BECOME ‘NEW NORMAL’" - BBG