Zhitong Finance and Economics learned that the Pacific Investment Management Company (PIMCO) said that the Bank of Japan may cancel the negative interest rate policy as early as March and raise interest rates several times this year, which has exacerbated the bearish outlook for Japanese government bonds. In a market outlook report, PIMCO said that Japan is expected to raise its benchmark interest rate to 0% in March or April and to 0 by the end of the year25%;An acceleration in wage growth could create persistent inflation in the economy, ensuring a "supportive" condition for exiting negative interest rates.
Stephen Chang, one of the report's authors and manager of PIMCO in Hong Kong, said in an interview: "To get to 0At the 25% level, two rate hikes may be required. He said the rate hike could be 10 basis points and then 15 basis points, adding that PIMCO is leaning towards Japan's long-term government bonds to support its view.
Giants such as PIMCO and RBC Bluebay Asset Management are preparing for when the Bank of Japan will finally raise interest rates above zero, ending the eight-year-long negative interest rate policy that prompted Japanese investors to move trillions of dollars overseas. The return of these investments may have already begun, with the Asian country having a record number of Eurobonds in recent years.
At the end of last year, the BOJ "effectively ended its grip on the yield curve" by announcing that it would cap the 1% of the 10-year JGB yield as the upper limit of the reference rate instead of a hard cap, highlighting the BOJ's progress in raising interest rates, analysts at PIMCO wrote in the note. While the New Year's Day event in northwest Japan prompted traders to reduce bets on policy tightening in January, PIMCO said the impact of the natural disaster on the economy was ultimately minimal.
"As a result, it seems that the ultra-loose monetary policy that Japan has pursued for more than 20 years will eventually be phased out," Chang and his colleagues wrote in the report. Richard Clarida, global economic adviser at PIMCO, said in October that the Bank of Japan could scrap its yield curve control program by the end of last year.