BoJ likely to raise rates as early as May if Shunto wage talk results as strong as 2024

The data from Japan today showed solid economic growth:

• Japan Q4 GDP surges to +2.8% annualized (from +1.0% expected), deflator hits 2.8% - yen up

• USD/JPY traded under 152.00 after the very strong Q4 economic growth data

Akazawa is urging caution:

• Japan economy minister Akazawa is wary about the strong GDP result

ING tipping an earlier BoJ rate hike:

• Today's results are better than the BoJ's current GDP forecast (0.6% YoY for FY24 GDP).
• On the inflation front, headline prices are expected to jump to 4.0% YoY in January and remain at a high level of 3% for some time.
• According to a local news report, the outcome of Spring wage negotiations is likely to be as strong as last year.
• However, the main risk to our call is US President Trump’s tariff policy. Tougher-than-expected reciprocal tariffs on Japanese goods could complicate the BoJ's growth outlook.
• But, in our view, the BoJ’s policy priority in the near term should be to contain excessive inflation. Thus, we maintain our BoJ forecast of a hike in May and October in 2025 and an additional hike in 2026.