Trump's policy "stirs the pot"! Mizuho expects the Bank of Japan to hold off on interest rate hikes in March, with possible action in May or June
Mizuho Securities expects that the Bank of Japan is unlikely to raise interest rates in March and may take action in May or June. Due to the uncertainty brought by Trump's policies, the yen has strengthened, and market expectations for yen appreciation have increased, leading to weakness in the Japanese stock market. The comments from the U.S. Treasury Secretary and Trump have also affected market sentiment. Mizuho Securities believes that although the Japanese cabinet supports a rate hike, under the current circumstances, raising interest rates may be seen as reckless
According to the Zhitong Finance APP, Mizuho Securities has released a report stating that due to the uncertainties brought about by Trump's policies, the Bank of Japan is unlikely to raise interest rates in March. Mizuho Securities believes that the Bank of Japan may raise interest rates again in May or June.
In the report, Mizuho Securities stated that Trump's tariff policies have led to significant fluctuations in the U.S. stock market. The yen has strengthened, with the USD/JPY exchange rate dropping to 146.64 at one point. The yen futures on the Chicago Mercantile Exchange (CME) show that non-commercial traders have reached a record net long position in yen, indicating an increased market expectation for yen appreciation. These expectations have contributed to the recent weakness in the Japanese stock market.
In addition to tariffs, Mizuho Securities believes that recent comments from U.S. Treasury Secretary Scott Pruitt and U.S. President Donald Trump seem to have abandoned stock investors, denying the existence of a "Trump put option," which has also put pressure on market sentiment. The so-called "Trump put option" refers to the market's general belief that Trump would not allow a significant decline in the stock market.
According to reports, Pruitt stated in an interview on March 7 that due to the market and economy's addiction to government spending, there may be a "detox period." He also explicitly denied the existence of the so-called "Trump put option" and denied expectations that the Federal Reserve would take action to support the stock market when necessary.
Trump confirmed this policy direction on March 9, stating that the U.S. economy is facing a "transition period." He also downplayed the recent significant fluctuations in the U.S. stock market, stating that one should not overly focus on the stock market.
Mizuho Securities believes that the Bank of Japan's interest rate hike in January may have been to avoid the risk of not being able to raise rates in March. Although the Japanese Cabinet supports the rate hike, given the uncertainties of Trump's policies, it is difficult to justify the rationale for action, and a rate hike at the March 18-19 meeting may be seen as reckless. Mizuho Securities stated that developments in the first half of March may prompt Bank of Japan officials to agree that they should seize the opportunity to raise rates.
Media reports have previously indicated that the Bank of Japan is increasingly monitoring the impact of rising food prices on inflation forecasts. The Bank of Japan may discuss the issue of interest rate hikes at the monetary policy meeting on April 30 to May 1, although this will depend on the data released after the March meeting, including the Bank of Japan's Tankan survey.
Mizuho Securities also agrees with this view, stating that the Bank of Japan may have already begun to consider raising interest rates again at the monetary policy meetings in April/May or June