Nomura (US:NMR) Hua Er Jie Jian Wen·2025-12-11 07:40Core Viewpoint - The Bank of Japan is expected to raise its policy interest rate from 0.50% to 0.75% during the December monetary policy meeting, with a probability of approximately 90% priced in by the market [1][2][5]. Group 1: Interest Rate Expectations - Nomura Securities predicts that the Bank of Japan will likely emphasize that "real interest rates remain very low," indicating no dovish signals suggesting an end to rate hikes [1][6]. - A recent survey shows that 90% of economists anticipate a 25 basis point increase in the interest rate during the December 18-19 meeting, with expectations for rates to rise to 1.0% by September 2026 and a terminal rate forecast of up to 1.5% [1][2][8]. - Nomura believes that the timing for reaching a 1.0% interest rate should be in January 2027, rather than the market's priced-in expectation of September 2026 [1][10]. Group 2: Economic and Political Influences - The upcoming wage negotiations and concerns over the yen's depreciation are significant factors influencing the Bank of Japan's decision to raise rates [2][5]. - Political shifts, particularly the changing stance of Prime Minister Fumio Kishida regarding aggressive fiscal expansion, are also seen as supporting the case for rate hikes [5]. Group 3: Communication Strategy - The focus post-rate hike will be on how Bank of Japan Governor Kazuo Ueda manages market expectations during the press conference [6]. - Ueda may maintain a qualitative stance that "real interest rates are very low" and a quantitative estimate of the natural interest rate range between -1% and +0.5%, while keeping future adjustments flexible [7][9]. - The market has already priced in a very aggressive rate hike path, with indicators suggesting a terminal rate expectation that may be overly hawkish [8][9].