Japanese Yen: Macro backdrop favors recovery against US Dollar - BBH

FXStreetJul 27, 2026 10:05 AM

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Brown Brothers Harriman’s (BBH) Elias Haddad anticipates the Bank of Japan (BoJ) will leave its policy rate at 1.00% after June’s hike, with inflation still below target and markets pricing only gradual tightening. While USD/JPY has surged on higher Oil prices, Haddad notes Japan’s macro backdrop would otherwise favor a firmer Japanese Yen (JPY) over the coming weeks.

BoJ seen on hold as USD/JPY elevated

"The BoJ is widely expected to keep the policy rate at 1.00% after delivering a well-telegraphed 25bps hike in June. Inflation is running below the bank’s 2% target."

"The swaps curve price in a 25bps rate hike by year-end and a total of 60bps of tightening to between 1.50% and 1.75% over the next twelve months. That would still leave the policy rate near the middle of the BoJ’s estimated neutral range (1.10%-2.50%) while the economy operates above potential."

"USD/JPY surged to near a 40-year high last week underpinned by firmer crude oil prices. Absent the renewed oil shock, Japan’s macro backdrop would favor a firmer JPY."

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

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