Traders bet heavily on Bank of Japan raising interest rates next week: "Almost certain to raise interest rates"

The Golden Finance report shows that the overnight index swap on Friday indicates a 99% chance of the Bank of Japan taking action at its meeting on January 23-24, a significant increase from Wednesday's 71%. The Governor of the Bank of Japan, Kazunari Ueda, reinforced market expectations on Wednesday. His comments drove up the yen. He stated that the central bank will make a decision on raising interest rates next week and expressed growing confidence in wage growth.

On Thursday, this signal became even more apparent. Foreign media reports suggest that unless Trump's entry into the White House brings too many surprises, officials at the Bank of Japan believe there is a high likelihood of an interest rate hike. The yen is experiencing its largest weekly gain since late November last year. Japanese government bond yields are rising across the board, with yields on two-year bonds sensitive to monetary policy expectations reaching their highest level since 2008 on Wednesday. "It can now be almost certain that the Bank of Japan will raise interest rates next week," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities in Tokyo. "The final hurdle is Trump's policy but I don't think markets will become extremely volatile because of his inauguration speech."