A handful of big-name investors are still betting on more interest rate hikes in Japan in the coming months, even after a sharp decline in market pricing for more tightening this year.

Vanguard, the world’s No. 2 asset manager, has doubled down on its short position in Japanese government bonds as it still sees the possibility that the central bank can deliver an additional 50 basis points of rate hikes by December. The prospect of another hike has also prompted M&G Investment Management to keep adding to its short JGB position, while staying overweight on the yen. RBC BlueBay Asset Management continues to dump Japan’s 10-year sovereign bonds.

These positions are at odds with the overnight swaps market, which is pricing about a 29% possibility that the Bank of Japan will raise rates from 0.25% by the end of the year, down from about 63% at the start of the month. They are also in contrast to the likes of AllianceBernstein, which has said the BOJ will find it difficult to raise rates further in 2024 unless the yen slumps back past ¥160 to the dollar. But if the trio are proved right, the tighter policy may spur more gains in the yen, along with an ongoing, gradual rise in JGB yields.