Nomura: Short-term survey shows that Japanese companies are ready for the central bank to raise interest rates.

Nomura's forex strategist stated that the latest short-term survey and Japanese wage report show that there are no obstacles for the Bank of Japan to raise interest rates later this week. The resilient business conditions and CPI outlook for the coming years have strengthened expectations for a 25 basis point rate hike by the Bank of Japan on Friday; the forward market predicts a 95% likelihood of the central bank raising the policy rate to 0.75% this week and expects another rate hike by October 2026. "Past rate hikes by the Bank of Japan have raised borrowing costs for businesses; however, companies have not yet seen these hikes as having enough tightening force to significantly impact their operations," wrote the strategist team led by Yujiro Goto in the report. They added that in the latest survey released earlier that day, most companies stated that their cash flow situation was "good." While Nomura believes that the Bank of Japan may not make significant updates to its neutral rate estimate at this month's meeting, the firm expects the central bank to "likely continue to consider the actual policy rate as still below the neutral rate, and therefore remain accommodative."