JPY Outlook: BoJ Expected to Hold Rates, but Market May Undervalue Future Hike Risks

JPY Outlook: BoJ Expected to Hold Rates, but Market May Undervalue Future Hike Risks

BoJ Poised to Keep Rates Steady at 0.5%

The Bank of Japan (BoJ) will kick off a pivotal week for G10 central banks, with its latest interest rate decision due Tuesday. Markets widely anticipate that the BoJ will leave the overnight rate unchanged at 0.5%, maintaining a cautious stance as it continues evaluating Japan’s inflation outlook and wage trends.

Market May Be Mispricing Rate Hike Risk

Despite consensus on a pause, economists argue that markets are underestimating the likelihood of future BoJ rate hikes in 2025.

With core inflation hovering above the 2% target and wage pressures gradually building, the BoJ may be compelled to act sooner than expected—especially if global commodity prices remain elevated due to Middle East tensions.

Implications for the Japanese Yen (JPY)

A dovish hold could see the JPY soften further, but any hints of tightening later in the year might trigger a revaluation of the currency. Traders will closely watch BoJ Governor Kazuo Ueda’s comments for any guidance on future policy path.

What to Watch Next

• BoJ Policy Statement – June 18
• Press Conference by Governor Ueda
• Global central bank meetings (Fed, SNB, BoE) this week
• Japan CPI data release later in June

Related Reads on Tredu.com:

• Japanese Yen Struggles Despite Safe-Haven Demand
• USD/JPY at Key Resistance Ahead of BoJ Decision
• Inflation Watch: What to Expect from Japan This Summer