BOJ could be ready to hike, but are the markets?

investmentnews.com:

The Bank of Japan sent one of the strongest signals yet that the end is near for its negative interest rate policy — an event for which the market is underprepared.

The BOJ’s price target is “finally coming into sight” as the nation shakes off the idea that wages and inflation won’t rise, board member Hajime Takata said Thursday.

His comments, which follow remarks from the central bank’s governor last week, pushed the yen and bond yields higher, along with pricing in swaps markets for a rate hike next month. But the moves still leave investors vulnerable to heightened volatility if the central bank acts that soon.

“I feel that March is looking very likely after board member Takata’s speech,” said Tadashi Matsukawa, head of fixed income at PineBridge Investments Japan Co. “Takata’s speech brought the idea of a new policy framework to the forefront, and he also made in-depth comments on wages.”

Traders of overnight indexed swaps — who last year were certain that the central bank would change policy by the March 18-19 meeting — now see the chances around 26%. By contrast, economists who previously considered a move next month as unlikely are now talking about the gathering as a “live” event.

Takata, who is seen as a neutral member of the nine-member board, didn’t offer hints as to when such a move might be made. Seven of 15 Tokyo-based economists contacted by Bloomberg this week said there is a prospect of it happening in March, with three seeing it as almost certain and four judging it as possible.

Overall, the economists still forecast April as the most likely time for a policy shift. OIS price around an 84% chance of a hike by the April gathering.

“Short- and medium-term bond yields don’t seem to be adequately pricing in