Japanese Yen: Market needs more than BoJ pricing – OCBC
OCBC FX Strategist Sim Moh Siong and Christopher Wong highlight that the Japanese Yen (JPY) has already benefited from aggressive market pricing for Bank of Japan (BoJ) tightening, with an 85% chance of a September hike implied.
The Japanese Yen (JPY) has gained from the Bank of Japan's (BoJ) tightening measures, with an 85% probability of a September hike implied in the market. However, further gains may need more than just rate hikes, such as policies to encourage the repatriation of overseas assets, as the BoJ has limitations on how far and fast it can raise rates.
A September hike would break the typical six-month interval between rate increases during the BoJ's current tightening cycle. The BoJ's rates market already suggests an 85% chance of a September hike, with expectations of a faster pace of tightening leading to the policy rate reaching 1.75% by July 2027. Given the constraints on the BoJ's rate-raising capabilities, additional measures may still be necessary to address persistent JPY depreciation pressures.
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