BOJ Monetary Policy Navigator

Tail wags dog as rate hike expectations fade despite hawkish rate increase

• BoJ announced rate hike at July MPM and emphasized its intention to continue raising rates, yet market expectations of further hikes have faded
• While hawkish rate hike was effective in stopping yen's decline, stock market plunge highlighted problems with central bank's market dialogue
• Bank still intends to raise rates gradually, and we think investors will eventually be forced to price rate hikes back in