MUFG’s Halpenny states that the Bank of Japan (BoJ) is likely to raise interest rates by 25 basis points at its meeting on 16 June, with markets currently pricing in an approximately 80% probability of such a move [1]. Despite a recent easing in Tokyo inflation, which Halpenny attributes in part to government measures, the risk of the BoJ falling behind the curve is increasing [1].
The Japanese Yen (JPY) has continued to weaken even after the Ministry of Finance (MoF) confirmed a record one-month intervention, purchasing JPY 11.7 trillion between 28 April and 27 May in an effort to support the currency [1]. Halpenny suggests that BoJ action could help curb further yen selling, though he notes that developments in the Middle East, crude oil prices, and global yields will also play a significant role in determining the yen’s trajectory [1].
Market participants are closely watching the upcoming BoJ meeting, as the combination of persistent yen weakness and record intervention underscores the urgency for policy tightening [1].
CONCLUSION
The Bank of Japan is widely expected to consider a 25 basis point rate hike on 16 June, with markets assigning a high probability to this outcome. Persistent yen weakness, despite record intervention, highlights the pressure on the BoJ to act, with broader market factors also influencing the currency’s outlook.