BofA Global Research indicates Japan's monetary policy is shifting dovish, influenced by Prime Minister Sanae Takaichi's reported reluctance to further rate hikes and the appointment of two dovish members to the Bank of Japan's Policy Board.
These developments have already triggered yen depreciation and a decline in JGB yields. However, BofA cautions that unchecked yen weakness poses significant political and financial risks, particularly due to elevated public concern over rising prices.
The bank argues that relying solely on foreign-exchange intervention to stabilize the yen is unsustainable if delayed policy normalization is perceived as the underlying issue. Consequently, BofA has revised its USD/JPY forecast higher to 153–161 from 150–158, suggesting that a move towards 160 could reignite pressure on the BoJ for further tightening, despite the current dovish signals increasing the near-term hurdle for a rate hike.
BOJ Governor Sticks to Rate-Hike Stance Amid Iran Tensions(current)
Originally reported as: “BOJ Governor Sticks to Rate-Hike Stance Amid Iran Tensions”
