Market Outlook: BOJ to Closely Monitor Wage Inflation

Daniel Hurley from T. Rowe Price predicted that the Bank of Japan will closely monitor inflation, particularly wage inflation, as it gradually and cautiously tightens its monetary policy. According to Hurley, the BOJ will tighten as data allow, which should support Japanese equities due to the low interest rates maintained by loose monetary policy compared to global counterparts and the relatively weak yen for exporters. He emphasized that a key area to watch for Japanese equities at the end of 2024 and the beginning of 2025 will be Trump’s trade policies, particularly those focused on China. Hurley stated, “This and Fed policy will have significant impacts on global trade, currency, and Japanese exports,” while noting that rising tensions between the U.S. and China will create pressure on global trade and growth, which will, in turn, affect Japan's open and cyclical economy.