Before the Middle East conflict, this April meeting was meant to be one where the BOJ delivers on another rate hike after the outcome of the spring wage negotiations.
Before the Middle East conflict, this April meeting was meant to be one where the BOJ delivers on another rate hike after the outcome of the spring wage negotiations. Instead, the war has complicated things and raised uncertainty to the point where policymakers don’t feel comfortable in rushing a decision – for now at least.
As oil prices stay higher, that is going to keep the pressure on the Japanese economy and also the yen as well. Given that backdrop, Nomura views that the BOJ may have to continue to keep a more hawkish leaning in order to prevent the currency from falling even further. That especially with USD/JPY continuing to flirt closer to the 160 level this week.
The firm notes that: “Markets are range-bound as they await direct US-Iran talks, with USD/JPY stuck around 159. Oil prices are still elevated, keeping JPY weakness pressures high. Whether a clear direction toward normalising navigation through the Strait of Hormuz will emerge from the direct talks will be crucial for the near-term JPY direction.