MUFG Research reviews the latest BoJ minutes from the June meeting.

"The minutes of the June BoJ policy meeting, when the BoJ raised rates to 1.00%, revealed that several members believed that monetary conditions would remain accommodative after that agreed rate hike. It was also evident in the minutes that inflation risks would remain to the upside and that there was a possible justification in considering a faster pace of monetary tightening to manage upside inflation risks," MUFG notes.

"The minutes today certainly opened up the prospect of a sooner rate hike. The implied probability of a September hike has now increased to close to 60%. Data released today also reinforces the prospect of a hike. Labour cash earnings increased 3.4% YoY in June, up from 3.2%. The same sample reading that the BoJ monitors for consistency jumped sharply, from 2.9% to 4.4%. This is yet more data indicating upside inflation risks that we believe should convince the BoJ to raise rates in September – a development that would help back up the intervention especially if a deal for a more lasting Middle East ceasefire is about to be announced in the meantime," MUFG adds.