Brown Brothers Harriman (BBH) anticipates that the Bank of Japan (BoJ) will resume monetary tightening with a 25 basis point rate hike to 1.00%, ending a hold streak that began after its December rate hike [1]. Despite this expected move, BBH sees limited potential for a sustained rally in the Japanese Yen, citing that a more significant appreciation would require the BoJ to adopt a more hawkish stance, which they consider unlikely at this time [1].
BBH notes that the recent correction in crude oil prices has reduced some pressure on the Yen and could help push USD/JPY lower toward 155.00. However, they argue that a material break below this level would depend on a more aggressive policy shift from the BoJ. The bank points out that almost all underlying CPI indicators eased further below 2% in April, reinforcing their view that it is too soon to expect a hawkish pivot from the BoJ [1].
The upcoming BoJ meeting will not include an updated Outlook Report. Notably, BoJ Governor Kazuo Ueda will be absent due to hospitalization, with Deputy Governor Ryozo Himino acting as chair and Deputy Governor Shinichi Uchida hosting the post-meeting press conference. Both deputies have consistently voted in line with Ueda, suggesting policy continuity and limited risk of a surprise outcome [1].
CONCLUSION
The Bank of Japan is expected to raise rates by 25bps, but analysts see limited upside for the Yen without a more hawkish policy shift. With CPI indicators easing and leadership continuity assured, market participants anticipate only a modest reaction to the BoJ's decision.