UBS: Bank of Japan rate hikes in coming months appear warranted

Masamichi Adachi, Chief Japan Economist at UBS Global Research, commented that it seems justified for the Bank of Japan to raise interest rates in the coming months. He stated that Japan's real interest rates are negative, making the financial environment very loose. The inflation dynamics seem to support the view that the central bank should reduce its loose policy, as long-term inflation expectations are expected to continue to rise towards 2.0%. He also expects the government to seek fiscal expansion, which could mean higher inflation pressures. UBS expects the Bank of Japan to raise its policy rate by 25 basis points in January, but does not rule out the possibility of a rate hike in December. (FXStreet)