USD/JPY: Approaching 160 may increase BoJ intervention risk – DBS

USD/JPY Faces Pressure as BoJ Rate Hike Expectations Rise

According to Philip Wee from DBS Group Research, the USD/JPY exchange rate appears stretched as it approaches the critical 160 level, a point of concern for Japanese officials. While the currency pair has been buoyed by the interest rate gap between the US and Japan, market participants are now factoring in about a 67% probability that the Bank of Japan will raise rates on April 28.

Shifting Policy Stance Amid Yen Depreciation

Japan’s policymakers are increasingly viewing the sustained weakness of the Yen not as a benefit for exporters or the Nikkei 225, but as a significant driver of cost-push inflation that threatens household purchasing power.

The BoJ’s latest Tankan Survey further supports this more hawkish outlook, revealing that inflation expectations are rising and that Japanese businesses are generally confident enough to handle a 25 basis point rate increase without triggering a recession.

(This article was produced with the assistance of artificial intelligence and reviewed by an editor.)