That headline, “BoJ can’t save the yen”, is a cracker from ING, straight to the point.
That headline, “BoJ can’t save the yen”, is a cracker from ING, straight to the point. ING warns the BoJ cannot save the yen, sees USD/JPY challenging the 2024 high of 162 and flags an outside risk of authorities holding off intervention until the 165 area.
Summary: USD/JPY dipped modestly after hawkish dissent at Tuesday’s BoJ meeting but ING says the case for sustained yen strength remains unproven ING argues the BoJ was already running an accommodative policy before the Middle East crisis and its slow tightening pace risks pushing real rates further into negative territory A 25bp BoJ hike in June or July, taking the policy rate to 1.00%, would still leave real rates negative given core inflation expected above 2% ING expects upside pressure on USD/JPY to persist near term, with a steady dollar and a potentially hawkish Fed adding to yen headwinds The bank sees USD/JPY challenging the 2024 high of 162, with an outside risk that authorities hold intervention until the 165 area Japanese FX intervention is seen as less potent than in 2024, with speculative yen shorts currently around half the size that triggered the summer 2024 short squeeze ING notes the yen remains very cheap to hedge, limiting its appeal even for investors constructive on Japanese equities ING has warned that the Bank of Japan is not in a position to arrest the yen’s decline, arguing that the central bank’s cautious approach to tightening leaves the currency increasingly exposed as elevated energy prices push real interest rates deeper into negative territory. The note, published after Tuesday’s BoJ policy meeting, acknowledged a modest dip in USD/JPY following hawkish dissent among board members, but dismissed it as insufficient to change the broader picture. ING’s central argument is that currency markets are now focused primarily on real interest rates and the willingness of central banks to defend their economies from inflation.
On that measure, the BoJ falls short. The bank points out that…