Capital Economics' view that the BOJ will look through May's softer wage print keeps its 2% end-2027 rate forecast intact, suggesting markets should not read too much into a single month's slowdown in cash earnings growth. OCBC's warning adds a separate but related risk: persistent yen weakness combined with rising long-end JGB yields could become a source of broader global volatility, particularly if investors start attributing future hikes to political rather than economic drivers under Prime Minister Takaichi. While yen depreciation is likely to pressure regional currencies such as the won and baht, OCBC sees the bigger risk in JGB yields spilling over into US, UK and German bond markets, potentially pushing global yields higher.---Capital Economics says slower May wage growth won't stop further BOJ hikes, while OCBC warns persistent yen weakness and rising JGB yields could become a source of global market volatility, with spillover risk to US, UK and German bond yields.Summary:Japan's preliminary cash earnings growth slowed to 3.2% year on year in May, from 3.6% in AprilCapital Economics said core and base wage indicators remain well above their 2025 average and at historically high levelsCapital Economics maintains its forecast for the BOJ to raise rates to 2% by the end of 2027OCBC strategists say persistent yen weakness and rising long-end JGB yields make Japan a potential source of global market volatilityMarkets increasingly view the BOJ as behind the curve, and may see future hikes as driven by Prime Minister Takaichi's policy direction rather than dataOCBC flags larger spillover risk from rising JGB yields, which appear to be pushing up US, UK and German government bond yields, than from yen weakness itselfSlower wage growth in Japan is unlikely to deter the Bank of Japan from further interest rate hikes, according to Capital Economics, even as separate analysis from OCBC warns that yen weakness and rising Japanese government bond yields could become a source of broader global market volatility.Preliminary data showed Japan's cash earnings growth slowed to 3.2% year on year in May, down from 3.6% in April. Capital Economics senior Asia Pacific economist Abhijit Suriya said the slowdown is unlikely to alter the central bank's view that the labour market remains tight, noting that core and base wage indicators remain well above their 2025 average and at historically high levels. The firm maintains its forecast that the BOJ will lift rates to 2% by the end of 2027, suggesting a single softer print will not be enough to shift the tightening path.OCBC strategists, however, point to a different risk building around Japan's monetary policy. Markets increasingly view the BOJ as behind the curve, they said, a perception that has intensified downward pressure on the yen. Strategists expect investors may increasingly interpret any future rate hikes as being driven by Prime Minister Takaichi's policy direction rather than underlying economic data, complicating the market's read on the central bank's reaction function. Continued yen depreciation could weigh on other regional currencies, particularly the South Korean won and Thai baht, as investors adjust positioning across Asian FX.OCBC said the more significant spillover risk, though, lies not with the yen but with rising long-end JGB yields, which appear to already be pushing up government bond yields in the United States, United Kingdom and Germany. Sustained increases in JGB yields, the strategists warned, could lift global bond yields further, extending Japan's influence well beyond its own currency and rates markets. Together, the two views suggest that while the BOJ's domestic tightening path looks intact for now, the broader market consequences of its policy stance are becoming harder to contain within Japan alone. This article was written by Eamonn Sheridan at investinglive.com.