Societe Generale’s Jin Kenzaki and team say the Bank of Japan’s hike to 1.0% marks only the bottom of the neutral range, but new language on upside inflation risks supports further normalisation. Their house view is for 25 bp hikes each quarter to a 2% terminal rate by end‑2027, which should favour Yen appreciation from cheap levels over time.

BoJ normalisation seen supporting currency

"Our house view is for the policy rate to increase at a cadence of 25bp every quarter to reach the terminal policy point of 2% by the end of next year."

"That’s 25bp above the mid-point of the neutral range, but a doubling of the policy rate, all else being equal in the US and the eurozone, legislates for Yen appreciation from cheap levels over the medium term."

"Tactically, the breakdown in correlation of the Yen and oil prices is puzzling but is offset by the widening in 2y UST/JGB spread to 265bp vs pre-war lows of around 211bp."

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