1. BoJ Rate Hikes in September and December May Be Justified on Wages
Japan has long struggled with stagnant wage growth, but recent data suggests a shift as companies respond to labour shortages by increasing salaries. If this trend continues, the BoJ could take a more aggressive stance in adjusting its ultra-loose monetary policy. MUFG notes that while inflation has moderated, sustained wage growth could provide the necessary conditions for further rate hikes later this year.
MUFG analysts predict that USD/JPY could decline to 140.0 if markets fully price in Japan’s rate hike trajectory. Currently, the yen remains under pressure due to the wide interest rate differential between Japan and the United States, where the Federal Reserve maintains relatively high rates. However, if the BoJ signals a stronger commitment to tightening monetary policy, market participants may shift their expectations, leading to a stronger yen.
3. Expect Dollar-Yen to Trade Between 148 and 155 in the Short-Term
For now, the yen remains vulnerable to external factors such as shifts in U.S. economic data, Federal Reserve policy expectations, and broader risk sentiment. While intervention by Japanese authorities remains a possibility if the yen depreciates too rapidly, MUFG believes market forces will largely dictate the currency’s movements within this range in the coming months.
USD/JPY up
This article was written by Eamonn Sheridan at www.forexlive.com. Read More Details
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