The Bank of Japan's (BoJ) opinions suggest that many key members are advocating for a hike in Japanese interest rates, foreseeing a sustained or even surpassing inflation target.

USD/JPY News

This morning's release of the BoJ's Summary of Opinions indicated a possibility of Japan raising interest rates sooner than previously anticipated. This hawkish stance halted the USD/JPY's upward movement just below the 156.00 level in Thursday's trading (May 9).

The BoJ's Summary of Opinions reveals that several key policy board members are pushing for a gradual increase in interest rates, citing the likelihood of inflation persisting or exceeding the central bank's 2% target. One member stressed the importance of timing, suggesting that the BoJ should raise interest rates in response to growing growth and price forecasts.

"If the outlook shown in our April quarterly report is realized, our 2% inflation target will be sustainably and stably achieved in about two years and the output gap will be positive," another opinion showed. "Therefore, there's a chance our policy interest rate will be higher than the path currently priced in by the market."

In a separate event, BoJ Governor Kazuo Ueda discussed the potential for multiple interest rate hikes in the coming months. Addressing the Japanese Parliament earlier today, he remarked, "If currency volatility impacts, or poses a risk to, inflation trends, (then) the BoJ must respond with monetary policy."

Several hawkish signals from the BoJ have effectively countered the recent weakness in the yen, which followed the diminishing impact of Japanese interventions. As a result, USD/JPY's attempted rebound stalled, with market participants reevaluating the outlook for Japanese interest rate hikes. The upward momentum of GBP/JPY and EUR/JPY also slowed.

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Many analysts anticipate that the BoJ will raise interest rates by the year's end, although opinions vary on timing, magnitude, and frequency. Some also suggest that the BoJ may announce intentions to scale back large-scale bond purchases and begin reducing its balance sheet, which would represent a relatively easier monetary policy tightening compared to a direct rate hike.