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The changing outlook for Japan's OIS rates, which have never been positive since 2016, follows a move by the ECB to address inflation.

Tokyo money market prices in 2023 rate hike

Overnight index swap rate turns positive for first time since early 2016

RYO SAEKI, Nikkei staff writer | Japan

TOKYO -- For the first time in about six years, money market players in Tokyo clearly expect short-term interest rates to move into positive territory.

Forward contracts on the one-year overnight index swap (OIS) rate -- a key gauge of monetary policy expectations -- indicate that the market sees short-term rates rising above zero as early as spring of 2023. This trend in OIS rates reflects an expectation that the Bank of Japan will reverse its negative interest rate policy next year. Many market participants believe pressure will continue to mount on Japan to follow monetary tightening in the U.S. and Europe.

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