JPY: Hawkish BoJ hike – ING

The Bank of Japan (BoJ) hiked rates by 25bp this morning, in line with market expectations and consensus. Markets are still assessing Governor Kazuo Ueda’s press conference as we write, but the reaction in the yen to the whole event signals a hawkish surprise, primarily related to the upward revision in headline and core CPI forecast projections, ING’s FX analyst Francesco Pesole notes.

USD/JPY can be pushed into the 155.0 mark

“Policymakers now expect 2.4% inflation (up from 1.9%) in 2025 and the BoJ added that it will ‘continue to raise the policy interest rate and adjust the degree of monetary accommodation’, echoing the language used in the July statement. Some previous remarks by Ueda on potentially delaying the hike if markets proved too volatile following Trump’s inauguration have been clarified, with the statement highlighting that markets have been stable on the whole.”

“USD/JPY briefly traded below 155.0 this morning before paring back some losses as Ueda delivered a rather cautious tone at the press conference. He gave no indication about the timing for the rate hike or the pace of further tightening. Two-year JPY swap rates are up only modestly to 0.74%, signalling there is still room for a hawkish repricing down the line to help the yen.”

“We now expect two more hikes in May and October this year, which would help the yen counter the generalised dollar strength and keep some pressure on USD/JPY into the 155.0 mark.”