MUFG analysts see a Bank of Japan rate increase in June as likely, with 19bps already priced amid improving JGB demand and yen weakness.
USD/JPY remains broadly stable as Japanese Government Bond demand strengthens and crude oil prices decline, easing pressure on JGB yields. Recent super-long JGB auctions show improved metrics, with early signs of rising domestic buying at the long end.
Inflation risks and persistent yen weakness have increased expectations for a Bank of Japan rate hike in June. Markets have already priced in around 19bps of tightening, reflecting growing confidence in a policy shift. However, a hike may not trigger an immediate yen rally but could limit further declines.
The yen’s stability contrasts with the New Zealand dollar’s outperformance after the RBNZ signaled earlier and more aggressive rate hikes. USD/JPY trades near unchanged levels despite broader G10 currency moves.