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OCBC strategists Sim Moh Siong and Christopher Wong note that the Bank of Japan’s (BoJ) 25 bp hike to 1.0% and confirmation of tapering ending in 2027 have not materially supported the Japanese Yen (JPY). With real rates still among the lowest in G10 and USD/JPY above 160, they argue that intervention risk is high but unlikely to sustain a reversal without a clearer hawkish shift from the BoJ.
BoJ cautious, Yen still weak
“The BoJ raised rates by 25bp to 1.0%, as expected, with one dovish dissent from new PM Takaichi appointee Asada.”
“Policy bias remains for further hikes, but there is no signal of speeding up the rate hike cycle.”
“Despite policy rate at 30-year highs, Japan still has the one of the lowest real rate in the G10.”
“The impact of MoF FX intervention in late April has now been fully reversed, and then some, with USD/JPY above 160.”
“A clearer hawkish shift from the BoJ is needed to move the JPY from a funding currency toward an investment currency.”
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