Resume af teksten:
Bank of Japan (BoJ) besluttede at fastholde sin politikrente på 0,75%, trods stigende opfordringer til en rentestigning. Der var tre dissentierende stemmer blandt bestyrelsesmedlemmerne. BoJ’s makroøkonomiske rapport viser en opjustering af inflationsprognosen til 2,8% i 2026 og forventer, at inflationen forbliver over 2% i de kommende år. Samtidig blev BNP-prognosen justeret nedad. Der er ikke sat en tidsplan for den næste renteforhøjelse, men en stigning forventes i juni og igen i fjerde kvartal. Diskussionerne blandt BoJ’s bestyrelse var intense, med den største splittelse under guvernør Uedas ledelse. Den japanske yen er under pres, og valutaintervention kan blive nødvendig, hvis dollaren når tidligere højder.
Fra ING:
The Bank of Japan opted to maintain its policy rate, citing persistent uncertainty in the Middle East. Calls for a rate hike intensified, with three dissenting votes. The updated macroeconomic outlook reflects growing inflation concerns, yet Governor Ueda hasn’t set a timeline for the next hike. We expect a June hike, with another in the fourth quarter
BoJ Target Rate
Three dissenting votes
Apparently, there was heated debate over today’s decision
The Bank of Japan extended its pause at 0.75% — in line with market consensus, though against our call for a 25 bp hike. We had thought that recent data showing growing inflationary pressures, real interest rates remaining in deep negative territory, and solid “Shunto” wage-negotiation results might support BoJ action. Today’s results show that, although concerns about inflation grew, the majority of board members prefer a wait-and-see approach.
Still, the 3-to-6 split is the largest divide among board members during Ueda’s governorship. We assume the split votes indicate that board discussions should focus on the timing of the rate hike, rather than the direction.
The extent of dissent was a surprise. Board members Takata (who dissented in March), Tamura, and Nakagawa dissented. While Takata and Tamura are known for their hawkish views, Nakagawa’s stance was quite unexpected, as she is considered among the doves. Her term ends June 29 after June 16 meeting, making a June rate hike more likely.
Three dissenting votes suggest the decision was close
Source: Bank of Japan, ING estimates
Sharp upward revision of inflation outlook
In its quarterly macro-outlook report today, the BoJ raised its inflation forecast quite sharply to 2.8% year-on-year for fiscal-year 2026 (up from 1.9%) and 2.3% for FY27 (up from 2.0%). The FY28 estimate is 2.0%. During the press conference, Ueda stated that the BoJ’s base-case scenario anticipates oil prices returning to $70. The upward revision seems much more dramatic considering this BoJ assumption. In terms of growth, the GDP outlook was revised downward, though less sharply than inflation. GDP growth is 0.5% (from 1.0%) for FY26 and 0.7% (from 0.8%) for FY27. The FY28 outlook is 0.8%. The negative impact is mostly concentrated in 2026, and growth is expected to return above potential. The new outlook suggests that oil supply disruptions will modestly affect growth but will have a more prolonged and larger impact on inflation.
Meanwhile, the Bank of Japan’s new CPI indicators – core CPI excluding institutional factors – showed that inflation rose to 2.5% YoY in March from 2.2% in February, while nationwide core inflation rose 1.7%. It also clearly shows that underlying inflation stays above 2% and firms up.
Inflation is expected to stay above 2% for the next fiscal years
Source: Bank of Japan, CEIC, ING estimates
BoJ watch
Despite the quite hawkish signals we gathered from the meeting statement and quarterly outlook report, Ueda didn’t deliver a hawkish signal to the market. We believe the situation in the Middle East is fluid, so he would prefer not to provide a specific timeline for the next rate decision. Instead, he opened the possibility of future hikes. Ueda repeated basic comments that the BoJ is in the middle of a process to raise the policy rate to a neutral level and that, if the economy doesn’t undergo a significant slowdown, rate hikes are possible.
We expect inflation pressures to accelerate and broaden in coming months. Tokyo CPI inflation will be released on Friday. We expect it to rise to 1.7% YoY. The government’s gasoline price cap is expected to limit the gasoline price growth, but other energy-related prices – airfare, travel, logistics, and manufactured goods prices – are likely to rise faster. A weak JPY and bi-annual price adjustment should push up prices. Meanwhile, we expect GDP to soften in 2Q and 3Q26, but the government’s fiscal support will provide a cushion, preventing the economy from falling into a contraction this year. The government has released its oil reserves and is set to release more in May while increasing commodity imports from outside the Middle East. Therefore, the economy is likely to grow close to its potential level. Given this context, we expect that overall macroeconomic factors will lead the BoJ to implement a total of 50 bps by the end of 2026. While developments in the Middle East remain a swing factor, we believe the BoJ will raise rates once in June and again in the fourth quarter.
BoJ can’t save the yen
USD/JPY has come a little lower on hawkish dissent at today’s BoJ meeting, but the case for lower levels remains unmade. If energy prices remain elevated—or climb further—the yen becomes increasingly exposed, given the perception that the BoJ is reluctant to raise interest rates. For currency investors, the key focus now is real interest rates and the extent to which central banks are prepared to shield their economies from inflation.
The BoJ was running an accommodative policy even before this Middle East crisis hit. Its go-slow on tightening only risks real rates falling deeper into negative territory.
In reality, a 25bp rate hike from the BoJ in June or July may not make too much difference to the yen. A policy rate of 1.00% would be offset by core inflation expected above 2% over the BoJ’s forecast horizon. At the same time, the BoJ continues to brace for the forthcoming terms-of-trade shock. So far, this energy shock has been far smaller than that seen in 2022. Yet the negative pressure on the yen and on the currencies of the big Asian energy importers will likely dominate this year – barring a very quick resolution in the Gulf.
Given our view of a steady dollar this quarter as energy prices stay high – and perhaps a slightly hawkish Federal Reserve tomorrow – it looks as though upside pressure on USD/JPY will remain near term.
The big question, then, is where the BoJ will intervene? Investors will remember the very effective FX intervention undertaken in the summer of 2024 ($100bn sold) that triggered a major short squeeze in the yen. The problem for Japanese authorities now is that speculative yen shorts are only half the size they were in 2024. This will question the effectiveness and timing of any forthcoming intervention.
With yields deeply negative, a deteriorating terms‑of‑trade backdrop, an d policymakers seemingly hesitant to intervene, the yen continues to offer little appeal for investors . Even if one liked the Japanese equity story, the yen remains very cheap to hedge. As such, we increasingly think USD/JPY will challenge the 2024 high of 162. There’s an outside risk that authorities hold off on intervening until the 165 area for intervention to be effective.
Yen speculative short half what they were in 2024
Source: CFTC, Refintiv, ING
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