OCBC strategists Sim Moh Siong and Christopher Wong note that post‑energy shock JGB curve steepening has exposed Bank of Japan (BoJ) credibility risks, with markets increasingly uneasy that the BoJ is behind the curve. They expect a 25 bp hike on 28 April, but warn that a hawkish hold could see USD/JPY push into the 160s and trigger Ministry of Finance intervention back toward 155.

BoJ hike seen critical for yen

"The BoJ faces a growing credibility challenge. The damage is evident in the sharp steepening of the JGB curve after the energy shock triggered by the US–Iran war—an outcome that contrasts starkly with the post‑February curve flattening seen across other G10 markets."

"Market unease is building that the BoJ is falling behind the curve, intensifying pressure for an April rate hike to reassert policy credibility."

"Our base case is a 25bp hike on 28 April, though current pricing still reflects a meaningful risk of a hawkish hold."

"Failure to hike would likely see USDJPY push higher, potentially into the 160s, prompting Ministry of Finance intervention aimed at driving the pair back towards 155. Recent forceful messaging from Finance Minister Katayama suggests the authorities are prepared to act."

"Even so, we remain cautious on the JPY and retain our end-2026 USDJPY target of 155."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)