招商银行研究·2025-12-20 05:41Core Viewpoint - The Bank of Japan (BOJ) raised its policy interest rate by 25 basis points to 0.75%, marking the highest level since 1995, with unanimous support from all nine members [1][2]. Group 1: Policy - The BOJ's decision to raise interest rates is driven by high inflation and the depreciation of the yen, with November's CPI reaching 3.0% [2]. - The BOJ is expected to adopt a gradual approach to interest rate hikes, potentially increasing rates twice a year by 25 basis points, aiming for a range of 1-1.5% by 2026 [5]. - High inflation pressure is primarily supply-side driven, with food and utility costs being significant contributors, while service inflation is influenced by labor shortages due to an aging population [5][6]. Group 2: Economic Performance - Japan's economy contracted in the third quarter, with trade tensions severely impacting investment and exports [5][8]. - The combination of high inflation and low interest rates has allowed Japan to experience nominal growth that outpaces debt expansion, leading to a projected reduction in government leverage from 215% to 200% over the next five years [5][12]. Group 3: Strategy and Risks - The BOJ's cautious approach to interest rate hikes may lead to a reversal in yen liquidity, impacting global financial conditions, with approximately $9 trillion in low-interest yen positions potentially shrinking as the US-Japan interest rate differential narrows [14][15]. - Concerns over Japan's fiscal expansion, including a supplementary budget of 2.8% of nominal GDP and plans to increase defense spending, may lead to rising long-term bond yields and a potential "stagflation" scenario [17]. - The outlook for the yen remains weak, with limited potential for sustained appreciation despite the recent rate hike, while Japanese equities may continue to perform well due to global investment trends [17].