Summary
The BOJ has placed greater emphasis on the weak yen in its dialogue with the market and become more proactive in its stance toward normalizing monetary policy following the volatility over the Golden Week holiday. We expect the BOJ to move to reduce JGB purchases at the June meeting, then raise rates in July. Yen selling pressure is likely to recede if real interest rates for shorter maturities rise as the bond market factors this in. Meanwhile, in the US, rate cut expectations have stopped waning and the economy is showing signs of slowing. Expectations of an early interest rate cut could emerge again depending on developments. We suspect the USD/JPY may have peaked at the 160-level reached over the long holiday.
