BUZZ-COMMENT-Even if BOJ holds off Jan hike, March likely in play

Jan 20 (Reuters) - The Bank of Japan is now widely expected to raise rates at its Jan 23-24 Policy Board meeting, but even if it holds off this month, the market will look towards a move in March.

Short-end Japanese government bonds appear to have discounted a 25-basis-point hike to 0.50% with the two-year yield holding relatively bid around 0.672%.

Recent data has shown the economy remains on track for a moderate recovery. Core machinery orders Monday nL2N3OG00I, nL2N3OG008 and high Japan wholesale prices nL1N3OC028 argue for a hike. Inflation remains generally elevated and could rise further on energy prices nL4N3OD01R.

BOJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino also noted last week that a hike would be debated at this week's meeting, communication that suggests a BOJ move is imminent nP8N3M60KK, nP8N3MS09S. Many in the market have therefore come to expect a hike nL4N3OD05S.

Uncertainties that Ueda cited in the past as hampering a hike look to have receded somewhat with U.S. President-elect Donald Trump recently sounding more conciliatory in some of his positions, especially regarding China nL1N3OD0KF, nL2N3OF047.

Broad expectations that the BOJ will act may also play a part in this week's decision. Should the BOJ unexpectedly hold rates, it could cause considerable market turbulence and send USD/JPY shooting higher to the dismay of both the BOJ and the Japanese government.

There is no certainty that any decision on rates will be unanimous however. Board members Toyoaki Nakamura and Asahi Noguchi, both noted doves, dissented in favour of no change when the BOJ last hiked. This could be the case again this week or, if not this week, in March.

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(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)

((haruya.ida@thomsonreuters.com;))