ING’s Senior Economist Min Joo Kang notes that the Bank of Japan kept its policy rate at 0.75% and maintained a broadly unchanged economic outlook, while acknowledging higher uncertainty. Governor Ueda avoided giving timing signals on the next move, and ING still expects a rate hike in June. Government verbal intervention is seen helping keep USD/JPY below 160, buying the BoJ more time.

BoJ caution underpins restrained Yen outlook

"The BoJ acknowledged the risks surrounding the Middle East situation, but its outlook on the economy hasn’t differed much from the previous meeting. We think this analysis sets the stage for potential rate hikes in the months ahead."

"As we expected, Governor Kazuo Ueda did not drop any hint on the timing of the next rate hike at the press conference, as the BoJ would like to remain flexible amid the Middle East war. He repeated the directional guidance that if the economy continues to recover and inflation approaches to 2% in line with the BoJ’s projection, then the BoJ will continue to adjust monetary policy accordingly."

"But his remarks throughout the press conference were extremely cautious. He mentioned that the BoJ would make an appropriate policy judgement while examining available data at each meeting, and underlying inflation could move in either direction. He mentioned that a slim majority of board members see more upside risks to inflation, but we don't think this means that the board's stance has shifted toward being more hawkish."

"The government's verbal interventions also appear to be keeping USDJPY below 160 levels for now. This will buy more time for the BoJ to be patient about the next rate hike. It is a close call, but we believe that the BoJ will make its next move in June."

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