JPY: BoJ holds but signals summer hike – Danske Bank

Danske Bank’s Danske Research Team notes that the Bank of Japan (BoJ) kept its policy rate at 0.75% with a closer 6-3 vote, reinforcing expectations for a potential June or summer hike. The new outlook highlights stronger inflation pressures than activity, pushing JGB yields higher and strengthening the Japanese Yen. Markets now price roughly a 54% probability of a summer move.

Closer vote underpins summer hike risk

"As widely expected, the Bank of Japan is on hold this morning keeping the overnight call rate at 0.75%. The decision was taken with a 6-3 vote, a closer call than both at the March and January meetings when only Takata Hajime voted for a hike, supporting our expectation for a June hike."

"The new outlook report suggests that the energy crunch affects inflation more than activity with a 0.5pp revision to GDP growth in the fiscal year (FY) 2026 and only 0.1pp in FY2027 while inflation excluding fresh food and energy has been revised 0.4pp/0.5pp higher respectively."

"The board members' forecasts also indicate that they are more worried about faster inflation than the risk on activity."

"The market has reacted with a stronger JPY and JGB yields edging higher."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)