OCBC’s Christopher Wong highlights that the BoJ’s widely expected 25 bp hike to 1.0% and confirmation of tapering ending in 2027 delivered limited support for the Japanese Yen. Policy bias remains for further hikes, but the path is not accelerated, leaving Japan with the lowest real rate in the G10 and keeping JPY as a funding currency unless BoJ turns more clearly hawkish.

BoJ cautious stance caps Yen gains

"BoJ Tightens, JPY Lags: The BoJ raised rates by 25bp to 1.0%, as expected, with one dissent from new Board member Asada who preferred to hold. It also confirmed that tapering of bond purchases will end in April 2027."

"Policy bias remains for further hikes, but there is no signal of an accelerated tightening path. This limits near-term support for the JPY. Despite policy rate at 30-year highs, Japan still has the lowest real rate in the G10."

"Intervention risk remains elevated with USDJPY just above 160. However, intervention threats alone are unlikely to drive a sustained reversal. A clearer hawkish shift from the BoJ is needed to move the JPY from a funding currency toward an investment currency."

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