Markets price an 86% chance of a June BoJ rate increase, but authorities warn of FX volatility risks amid USD strength and higher U.S. yields.
The Japanese yen remains near 160.00 against the USD, despite growing expectations of a Bank of Japan rate hike on June 16. Markets assign an 86% probability to the move, though Governor Kazuo Ueda’s recent remarks were perceived as insufficiently hawkish to curb inflation concerns.
Japanese officials have reiterated commitments to the G7 agreement on limiting excessive currency volatility, signaling potential intervention. USD strength, driven by higher U.S. yields, has kept pressure on the JPY, with authorities emphasizing their readiness to act if needed.
Ueda acknowledged persistent inflationary pressures, noting that supply shocks during this period are unprecedented in decades. However, he also highlighted the need to balance rate hikes against growth risks, a debate echoing global central bank deliberations.