The yen is strong in USD/JPY and various other major cross pairs. However, there is still great uncertainty on the Japanese interest rate issue.

Several Bank of Japan (BoJ) officials delivered hawkish statements, growing market expectations for a rate hike this month. USD/JPY immediately fell around 1%, touching a one-month low of 147.58 in trading on Thursday (7/March). The yen was also strong versus the euro, pound sterling, and other major currencies. However, there is still significant uncertainty on this issue.

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The BoJ is running a loose monetary policy with an interest rate target of -0.1% and a yield target of approximately 0%. BoJ Governor Kazuo Ueda has also repeatedly expressed his intention to maintain this policy for longer.

The ultra-low interest rates resulted in the yen depreciating. Today's yen resurgence was triggered by the news that three of the nine BoJ Policy Board members were recently inclined to raise interest rates shortly.

Since last year, board member Naoki Tamura has supported BoJ's rate normalization. In a statement in August 2023, he even hinted that the BoJ could end its negative interest rate policy in March 2024.

Last week, board member Hajime Takata called for the BoJ to overhaul the stimulus program that has been implemented so far. He said he sees prospects for sustainably achieving the 2% inflation target.

Today, board member Junko Nakagawa delivered a similar message. She emphasized that the Japanese economy continues to move towards achieving the central bank's inflation target of 2% on a sustainable basis.

Their statements boosted the Japanese Yen exchange rate, while the US dollar was being pressured by Fed Chair Powell's statement yesterday. However, market participants should be cautious of the potential for further Yen weakness and a USD/JPY rebound if hawkish BoJ speculation falls apart again.

Three other BoJ Policy Board members strongly support continuing negative interest rates. Seiji Adachi stated that it may take until after April 2024 to determine if the time has come to raise interest rates. Toyoaki Nakamura and Asahi Noguchi also warned against tightening policy too early.

If BoJ Governor Kazuo Ueda remains in the staunch negative interest rate camp, the final decision will likely come to Deputy Governors Shinichi Uchida and Ryozo Himino. Uchida is usually dovish, while Himino is more hawkish.

Provisional estimates are that four BoJ officials are inclined to raise interest rates, while the other five are inclined to maintain interest rates. Therefore, the BoJ policy meeting on March 18/19 may not result in the market's expected rate hike.