Yen Gains as Bank of Japan Deputy Governor Himino Affirms Rate Hike Stance
The Japanese yen appreciated on Thursday following comments from Bank of Japan Deputy Governor Ryozo Himino, reinforcing expectations of continued rate increases throughout the year.
As of 4:55 p.m., the yen had gained 0.4% against the dollar, trading at 154.59. It had earlier reached a peak of 154.29, a 0.6% rise, as JGB yields surged amid anticipation of a hawkish stance from Himino and reports that the BOJ was downsizing its balance sheet.
Himino reiterated Governor Kazuo Ueda's remarks from last week, stating that the central bank will raise rates if its economic outlook remains on track. He also emphasized the abnormality of prolonged negative real rates and advocated for a gradual transition to a positive yield environment.
"Himino's comments were somewhat hawkish," said Juntaro Morimoto, senior currency analyst at Sony Financial Group. "Predicting the next move is challenging as it's not anticipated until mid-2025 at the earliest."
Despite the BOJ's recent rate hike, interest rate differentials between the US and Japan remain significant, continuing to exert downward pressure on the yen. Swap traders currently forecast a 66% probability of a BOJ rate increase by July and a complete move by October.
"Certain aspects of Himino's speech suggest he may believe the BOJ's terminal rate will be higher than 1%," said Teppei Ino, Tokyo head of global markets research at MUFG Bank Ltd. "This poses upside risk for the yen."