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2025-12-18 17:33:23
[Interest Rate Hike Unlikely to Boost Yen: Intervention Bottom Line and Depreciation Pressure – How to Resolve the Dilemma?] ⑴ Analysts at JPMorgan Private Bank stated that the Bank of Japan's belated interest rate hike is unlikely to trigger a significant appreciation of the yen. ⑵ She pointed out that the market has fully priced in the rate hike, and the Bank of Japan may hint at a longer interval between the next action, thus limiting the yen's upside potential. ⑶ Conversely, if the Bank of Japan unexpectedly keeps interest rates unchanged, it could lead to a surge in the USD/JPY exchange rate, potentially forcing Japanese authorities to intervene to stabilize the exchange rate. ⑷ The institution predicts that the Bank of Japan will raise interest rates again by 2026, bringing the policy rate to 1%, at which point inflation should gradually stabilize around the 2% target. ⑸ However, analysts emphasize that achieving this inflation target depends on preventing excessive yen depreciation, as currency depreciation directly impacts domestic prices. ⑹ Their basic forecast scenario is that the USD/JPY exchange rate will fluctuate within a high range of around 150 yen, and if the authorities continue to defend the exchange rate, the market may respect the "bottom line" of 160-162 yen. (7) However, in the long run, the negative interest rate differential between Japan and the United States, as well as Japan's fiscal risk premium, are expected to continue to suppress the appreciation potential of the yen.
