According to Lee Hardman from MUFG Bank, the Japanese yen is poised for appreciation even if the Bank of Japan (BOJ) adopts a cautious approach towards further interest rate hikes at its upcoming meeting on Thursday. Amidst the backdrop of US tariffs, the BOJ is anticipated to adjust its economic outlook by lowering growth and core inflation forecasts for this fiscal year.
“However, the revised forecasts are likely to indicate that inflation will remain near the target in the coming fiscal year, implying the potential for additional rate hikes,” Hardman commented. He further elaborated, “The yen is expected to gain strength amid a slowdown in global economic growth. This scenario is likely to prompt other major central banks, including the Federal Reserve, to implement more significant rate cuts, thereby reducing the yield differentials with Japan.”
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