MUFG’s Senior Currency Analyst Lee Hardman notes that the Japanese Yen has underperformed, pushing USD/JPY back above 156.00. Media reports that Prime Minister Takaichi is pressuring the BoJ to slow further rate hikes, alongside signals that Japan may be less concerned about Yen weakness, are seen dampening expectations for faster BoJ tightening and encouraging additional Yen selling.

BoJ hike expectations face political headwinds

"The yen has underperformed overnight resulting in USD/JPY rising back above the 156.00-level as it moves further above the low of 152.27 from 12th February."

"The renewed yen sell-off overnight has been triggered by media reports that Prime Minister Takaichi is putting pressure on the BoJ to slowdown plans for further rate hikes."

"The Mainichi report will put a dampener on market expectations for the BoJ to speed up the pace of tightening by raising rates as soon as in April."

"There are currently around 15bps of hikes priced in for April which could be scaled back and encourage further yen selling."

"The report could also create the impression that Japan is less concerned by yen weakness reinforcing selling overnight alongside speculation that the government will pressure the BoJ to slowdown policy tightening."

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