USD/JPY & BOJ policy signals
Key Questions
What is Japan's latest inflation data showing?
Core inflation hit its lowest level since 2022, yet the BOJ's new trend gauge reads 2.8% versus the official 1.4%, complicating the rate outlook. Tokyo inflation is also slowing below target.
What signals has the BOJ sent on future rate hikes?
Deputy Governor Himino reaffirmed hike commitment and Governor Ueda turned more hawkish, raising June hike odds. Markets are now pricing a move to 1% in June, with economists expecting another hike by December.
How has the Iran peace deal affected USD/JPY?
The dollar slid on the deal, potentially easing pressure on the yen. USD/JPY has traded in the 159-162 range amid mixed JGB yields and rising superlong yields on inflation expectations.
Japan core inf lowest since 2022, but BOJ's new trend gauge at 2.8% vs official 1.4% complicates rate outlook. BOJ held at 1.00% as expected; Ueda signaled 'firm discussions' from next meeting, opening door for September move. Two-thirds of economists see another hike to 1.25% by Q4 2026. USDJPY 159-162. Dollar slides on Iran peace deal, but hawkish Fed dot plot supports dollar. Japan faces systemic risk from yen weakness and JGB selloff, with potential carry trade unwind and global contagion channels.