Japanese Yen: BoJ hike offers limited Yen relief – BBH

Brown Brothers Harriman expects the Bank of Japan to resume tightening with a 25 bps hike to 1.00%, but sees limited scope for a sustained Japanese Yen rally. While lower Oil prices could help nudge USD/JPY toward 155.00, the bank argues that a more material break below this level requires a hawkish BoJ, which they deem unlikely for now.

BoJ tightening but still cautious

"The correction in crude oil prices takes some pressure off JPY and could help nudge USD/JPY lower to 155.00. But breaking materially below that level hinges on the BoJ to lean more hawkish. It’s too soon to bet on that because almost all underlying CPI indicators eased further below 2% in April."

"The BoJ is widely expected to deliver a 25bps rate increase to 1.00% (Tuesday), ending a hold streak that began after its December rate hike. There is no updated Outlook Report associated with this meeting."

"BoJ Governor Kazuo Ueda will be absence at this week’s policy meeting due to hospitalization. BoJ Deputy Governor Ryozo Himino will serve as acting chair while Deputy Governor Shinichi Uchida, will host the post-meeting press conference. Both individuals have consistently voted in line with Ueda, suggesting policy continuity and limited risk of a surprise."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)