Ben Powell of BlackRock's research unit said the Bank of Japan, after lifting
rates to the highest level since 1995, is likely to be cautious about further
hikes. Domestically, solid wage growth, persistent core inflation and deeply
negative real rates support a case for tightening. Externally, hopes of cooling
Middle East tensions reduce the risk of a prolonged energy shock and should help
restrain imported inflation. Powell noted inflation still risks running above
the BOJ's 2% target. BlackRock maintains an underweight in JGBs, expecting
further rate moves, an elevated global term premium and large issuance to
continue pressuring yields higher. Over a 6–12 month horizon BlackRock is
neutral on Japanese equities due to ongoing import energy cost headwinds; over
the longer term it remains overweight versus benchmark as inflation and wage
trends support corporate profitability.
