Rabobank’s Senior FX Strategist Jane Foley notes that despite shifting rate expectations elsewhere in G10, surveys show BoJ watchers still expect a rate hike by the end of June. The bank underlines that higher energy prices worsen Japan’s terms of trade and create uncertainty over April policy, with upcoming guidance from Governor Ueda seen as crucial for near-term Japanese Yen performance.

Energy shock complicates BoJ rate outlook

"The Reuters survey indicated that BoJ watchers continue to expect the BoJ to hike rates next by the end of June."

"The market will be watching the BoJ’s March 19 meeting for any clues as to the risks regarding an April move. The most recent Bloomberg survey suggests that more than one third of participants already expect a hike next month."

"For an energy importer such as Japan, however, higher prices of oil and gas will lead to a deterioration in the terms of trade."

"The BBG survey indicates a lack of consensus as to whether higher energy prices will increase the chances of a BoJ rate rise in April on the back of the inflation implications or reduce the risks due to the headwinds to growth."

"Next week’s guidance from BoJ Governor Ueda could thus be instrumental for the near-term performance of the JPY."

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