After the Bank of Japan (BoJ) concluded its negative interest rate policy, the USD/JPY has rebounded above the key level of 150.00. Analysts at Rabobank provide insights into the pair’s future prospects.
BoJ prospects of hiking rates again this year remain highly uncertain
In its latest policy statement, the Bank of Japan (BoJ) noted that based on the outcomes of this year’s annual spring labor-management wage negotiations thus far, there’s a strong likelihood of continued steady wage increases throughout the year. This sentiment has bolstered the Bank’s confidence in achieving its price stability target.
If the robust pay agreements granted to unionized workers extend to the remaining 70% of employees who are not part of a union, Japan’s real wage growth could see an upturn in the near future. Policymakers are optimistic that this will stimulate consumption, consequently supporting corporate profitability. This would signify the completion of the BoJ’s envisioned virtuous cycle. However, the potential for the BoJ to raise rates again this year remains highly uncertain at present.
Our three-month USD/JPY forecast of 146.00 is based on the assumption of an initial Fed rate cut in June and an improvement in Japanese real wage data. Looking further ahead, our 12-month USD/JPY target is 140.00.
